Experience, prediction and recollection of loan burden

Loan use is a process over time, and the subjective loan burden may differ over stages. In this paper, experience of loan burden over time is contrasted with forecasts and recollections. Furthermore, it is suggested that loan burden relates to the mental association between the loan and the loan-financed goods. A survey of 117 homeowners at different stages of the loan process demonstrated that participants expected lower levels of loan burden in the future and reported higher levels in the past; in their view, loan burden decreases over the loan period. In contrast, participants at all stages reported similar current loan burden, suggesting no systematic change over time. Predictions and recollections were systematically different from experience: predictions were too positive, recollections too negative. Subjective loan burden can, in part, be predicted by home-to-loan associations, i.e. the degree to which thoughts of the home evoke thoughts of the loan. Homeowners seem to hold an intuitive theory about adaptation to the financial situation and this contributes to misforecasts.