Study: People Four Times More Likely to Default on Loans if Parents Also Defaulted

By:
Chris Gaetano
Published Date:
Jul 14, 2017
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A recent study from Denmark says that those with parents who've previously defaulted on loans are four times more likely to, themselves, default on a loan, at least compared to those raised by more scrupulous borrowers, according to Bloomberg. The study looked at 30 million personal loans held by about 5 million Danish people between the ages of 18 and 45, and then cross referenced that with government data to determine demographic information about individual borrowers, including income level and education, and their parents. What was found was that, of 30-year-olds who were at least 60 days late on a loan by the end of the year, 23 percent had parents whose records showed similar financial difficulties. Only 5 percent had parents who had no such problems. This tracks with previous research that found that children tend to have similar risk tolerances to their parents. The authors, however, noted that circumstances might be different in countries other than Denmark, which has a generous social safety net. 

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