Friday, Mar 28, 2025 • Brian Lopez : contact

Given the ease of securing loans in today’s digital world, it’s perhaps not surprising that new research from The University of Texas at Arlington shows more people are borrowing than ever—particularly during emotionally vulnerable times.

“We found that people are taking out these loans based on emotion and not thinking about the long-term financial impact,” said Sima Jannati, an assistant professor in the Department of Finance and Real Estate and author of the study on online borrowing.

The study shows that advancements in financial technology have led to a rapid increase in unsecured personal debt, with a record-breaking 19.3 million people currently holding at least one outstanding personal loan. Jannati explained that the rise of peer-to-peer lending—the practice of lending money to individuals or businesses through online services that match lenders with borrowers—has made it easier for people to secure loans by bypassing traditional banks and their stricter lending requirements.

While the effects of taking out loans from online platforms are well-known, Dr. Jannati said her study aimed to gain a deeper understanding of people’s financial behaviors.

She found that people who impulsively take out these loans are also defaulting on them, meaning they fail to repay the money, which negatively impacts their credit scores.

“It takes just a few hours to get a loan through these platforms,” Jannati said. “We wanted to see how and when people are taking these loans out.”

She noted that, just as people often engage in “retail therapy” to lift their spirits during emotional lows—buying unnecessary items to boost their mood—some turn to loans to fund impulsive spending.

“Unfortunately, this emotional decision-making can lead to long-term financial consequences,” Jannati said. “When people borrow money to soothe their feelings, they may overlook the repayment terms and end up in a cycle of debt.”

Jannati’s research underscores the need for greater financial literacy and emotional awareness when making borrowing decisions. She hopes her findings will encourage consumers to pause and consider the long-term impact before seeking quick-access loans during emotionally vulnerable moments.