Scarcity and borrowing behavior: from opening a new line of credit to repayment strategy

Unprecedented economic shocks have exacerbated many people’s perceived financial hardships and increased their likelihood of turning to loans for financial relief. Across two studies, we investigated psychological variables underlying indebtedness under financial scarcity. We found that participants experiencing financial scarcity (vs. control) were more likely to incur debt; especially those with a higher sense of ownership of the borrowed money. Conversely, higher worries about debt and higher emotion regulation were associated with a lower willingness-to-borrow. Better understanding of the psychological variables underlying indebtedness under scarcity will help design better interventions.