Loan calculators – August 2019
The CCPC funded a controlled behavioural experiment carried out by the ESRI’s Behavioural Research Unit to understand how online tools affect consumers’ decisions around credit. The experiment was to test whether the default repayment terms set on loan calculators and search tools influence the loans that people choose.
A representative sample of 180 consumers took part in the controlled experiment. The task was to imagine that they were looking for a loan of €10,000 and to use a simulated online calculator and search tool to choose both a provider and how long to take to repay the loan. Half of the participants were provided with the default loan term of five years, upon initial viewing of the loan calculator. The other half were shown the loan calculator with default term set at one year.
The consumers who saw the default term set at five years subsequently chose loans with longer repayment terms than those who saw the initial term set at one year. Choosing a longer loan would have cost the average consumer in the experiment a minimum of €470 in additional interest costs on a €10,000 loan.
The findings imply that the default settings on online financial calculators can influence consumer choices away from what they might otherwise choose.
For full details on the report please see here.
Return to Market Research