Missed payments, renegotiations, and household consumption

Abstract

The paper examines how consumption habits of borrowers are affected after missing
one or more payments or when their loan payments are delayed by more than 90
days. In addition, we investigate how household consumption may be impacted by
successful loan restructuring. Using data from the Eurosystem Household Finance
and Consumption Survey for 2017, we find that households with late or missed loan
payments report a fall in consumption levels and those with loans in arrears register
an increase in consumption. This suggests that a household’s failure to fulfil its
commitments may actually help it increase its consumption. Other determinants
that affect household consumption and income disparities are also considered to
be explanatory variables.