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Filene report Debt either solid tool or slippery pit
MADISON, Wis. (9/28/12)--A new report on lending from the Filene Research Institute "traffics in human insights" rather than the percentages and statistics that are the focus of many financial-oriented studies.

The lending process creates an intense relationship between emotional and financial factors, researchers found in "The Culture of Borrowing and Debt: An Ethnographic Approach," based on interviews with more than 100 members involved in the lending process at 11 credit unions nationwide.

"Like a tugboat pushing a ship in the harbor, they are linked," Filene Research Director Ben Rogers wrote in the report's executive summary. "For some, emotion is the tugboat; for others it's the ship."

Among the implications for credit uniond offered in the report:

  • Many members perceive credit unions as social institutions first and financial institutions second. The implications are that high-touch and education-based interactions are expected, as are underwriting criteria that are more flexible.
  • Convenience is (still) king. Interviews confirmed separate research that even loyal credit union member will default to the path of least resistance in obtaining a loan, even if the deal isn't as good.
  • Members often appreciate tough love. Many members expressed respect and even appreciation when the credit union couldn't make the loan. Credit unions were advised to communicate this message in a friendly way.
  • Positive experience helps bind members to their loans and to the credit union. Personal loans, mortgages, and using credit cards (but paying them off monthly) are all loans that members see as healthy borrowing. Helping members see the value of other types such as auto and student loans will help them be more responsible, the report said.
  • Even members with excellent finances and low debt don't always report personal satisfaction. Instead members who applied emotional and financial criteria to their borrowing decisions in what the report called a "golden mean" were most likely to report being happy.
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