Prior research highlights the negative consequences of debt aversion, which can constrain tertiary education, home ownership, liquidity management and broader financial decision-making. The goals of this research are therefore to document variation in debt aversion by product in two Anglosphere samples, to develop a suitable measure of debt attitudes that can be applied across products, and to determine the correlates of debt attitudes and debt aversion.
We investigate debt aversion among young adults in Australia and the United Kingdom using a cross-sectional survey of 995 respondents spanning 14 debt products.
Even the most accepted product, home loans, attracts avoidance in a significant minority (14–25% of participants), with some products attracting avoidance rates of more than 70% (informal debt from family and friends, personal loans, payday loans). Exploratory and confirmatory factor analyses identify two attitude dimensions: an investment-oriented dimension associated with asset-building debt, such as home loans, and an expense-buffering dimension linked to consumption-smoothing credit, such as BNPL (buy-now-pay-later).
We discuss implications for product design and for policymakers, with a focus on home loans and BNPL.
Our new measure of debt attitudes can be applied across products. Frugality and debt literacy are negatively associated with buffering attitudes, while social norms and risk tolerance are positively associated with both attitude dimensions. Debt attitudes and their correlates play a central role in explaining debt aversion.
