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Good credit, bad credit: The differential role of the sources of debt in life satisfaction
Author(s) -
Bialowolski Piotr,
WeziakBialowolska Dorota
Publication year - 2021
Publication title -
journal of consumer affairs
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.582
H-Index - 62
eISSN - 1745-6606
pISSN - 0022-0078
DOI - 10.1111/joca.12388
Subject(s) - arrears , debt , loan , credit card , debt service ratio , recourse debt , monetary economics , debt levels and flows , internal debt , financial system , economics , business , demographic economics , finance , payment
This study evaluated the short‐term links between different forms of household debt—credit card debt, student debt, debt from relatives, mortgage debt, car debt, and debt arrears—and life satisfaction. To this end, a longitudinal dataset for the US population from the Panel Study of Income Dynamics (PSID) was used and the propensity score difference‐in‐differences approach was applied. Credit card debt and student loans negatively impacted life satisfaction in the short term (up to 2 years). Mortgages and external financing for a car, however, were found to increase life satisfaction. The effects associated with the initial uptake and final repayment of a loan turned out to not be symmetrical—the end of any type of loan contract was not related to life satisfaction. In the case of involuntary debt (i.e., mortgage arrears), a significant negative impact on life satisfaction was noted when problems emerged, while a positive effect was found when the debts were paid off.