Being Bad at Math Linked to Higher Loan Default Rate

Geo Beats
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Using data about loan payment history and the results of telephone interviews with the people who took out the loans, the researchers determined that a lack of basic math skills correlated with the likelihood of defaulting on a loan.

A new study links people defaulting on loan or mortgage payments with poor basic math skills.

The study from a team of economists looked at 339 subprime mortgages taken out in the New England region of the United States between 2006 and 2007.

Using that data, and the results of telephone interviews with the people who took out the loans, the researchers determined that a lack of basic math skills correlated with the likelihood of defaulting on a loan.

Subjects of the study were asked questions like “A second hand car dealer is selling a car for $6,000. This is two-thirds of what it cost new. How much did the car cost new?”

Their responses to this and other questions were timed, which also factored into the data results.

In 2008, a global financial crisis hit the economy, caused in part by borrowers inability to repay their bank loans..

What do you think? Do poor math skills factor into poor financial decisions?

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