Title
Credit union loan rate determinants in the United States
Publication Date
10-20-2020
Publication Name
Applied Economics
Volume
52
Issue
49
First Page
5413
Last Page
5425
Source Full Text URL
https://doi.org/10.1080/00036846.2020.1764481
Document Type
Article
DOI
10.1080/00036846.2020.1764481
Abstract
© 2020 Informa UK Limited, trading as Taylor & Francis Group. Credit union participation in the consumer lending market continues to grow as an increasing number of consumers and small businesses become members and open accounts. This study investigates the determinants of credit union loan rates during a period of economic expansion in the United States using fourth quarter 2015 data for 5,942 credit unions. Five different interest rate categories are analysed using nine potential loan rate determinants. Results indicate that loan rates tend to be lower as credit union size increases, while high ratios for net charge-offs and operating costs cause interest rates to increase. Opposite to what is expected, loan rates are positively correlated with regional unemployment rates. A possible explanation for this outcome is that weak labour markets are associated with elevated loan delinquency rates and, therefore, greater default risks resulting in higher interest rates.