According to the study published in the Journal of Marketing Research, which of the two pieces of text indicates higher chances for a loan default?

#1: "While the past year in our new place has been more than great, the roof is now leaking and I need to borrow $2,000 to cover the cost of repair. I pay all bills (e.g., car loans, cable, utilities) on time"

#2: "I am a hard-working person, married for 25 years, and have two wonderful boys. Please let me explain why I need help. I would use the $2,000 loan to fix our roof. Thank you, and I promise to pay you back."

Question

According to the study published in the Journal of Marketing Research, which of the two pieces of text indicates higher chances for a loan default?

#1: "While the past year in our new place has been more than great, the roof is now leaking and I need to borrow $2,000 to cover the cost of repair. I pay all bills (e.g., car loans, cable, utilities) on time"

#2: "I am a hard-working person, married for 25 years, and have two wonderful boys. Please let me explain why I need help. I would use the $2,000 loan to fix our roof. Thank you, and I promise to pay you back."

BlackTom AI · Accepted Answer

The prompt asks us to compare two text passages to judge which one signals a higher likelihood of loan default. Each option should be examined for signals about creditworthiness and repayment risk.

Option Text #1: "While the past year in our new place has been more than great, the roof is now leaking and I need to borrow $2,000 to cover the cost of repair. I pay all bills (e.g., car loans, cable, utilities) on time". In this text, the borrower acknowledges a financial need (roof repair) but also asserts a history of on-time bill payments across a range of obligations, including car loans and utilities. This indicates some track record of timely payments, which generally lowers default risk. Additionally, the urgency is framed as a necessary emergency rather than ongoing inability to meet obligations. Overall, the presence of a payment history and a concrete purpose for the loan reduces perceived risk in this passage.

Option Text #2: "I am a hard-working person, married for 25 years, and have two wonderful boys. Please let me explain why I need help. I would use the $2,000 loan to fix our roof. Thank you, and I promise to pay you back.". Here, the borrower emphasizes personal circumstances and a promise to repay, but there is less explicit evidence of a concrete payment history or current financial obligations. The appeal is more emotional and relies on character and intent rather than observable repayment behavior. The lack of verifiable repayment track record or stable income details can signal higher credit risk, as lenders often rely on documented payment histories. The phrase "I promise to pay you back" lacks enforceable commitment and could be seen as weaker assurance compared with documented on-time payments.

Why Text #2 is more associated with higher default risk: it leans on personal appeal and promises rather than demonstrable repayment behavior or income stability, which are key indicators lenders use to assess risk. The emphasis on hardship without presenting verifiable cash-flow data can raise concern about the borrower’s ability to consistently service the debt. Conversely, Text #1 provides evidence of timely payments across obligations, which is a classic sign of lower risk, even though it acknowledges a repair-related need.

Why Text #1 is less risky than Text #2: the explicit claim of paying all bills on time across multiple categories suggests a history of meeting financial obligations, which tends to predict lower default risk in many credit models. The stated purpose (roof repair) is concrete, and the prior record of on-time payments is a concrete indicator lenders weigh heavily.

In summary, Text #2 relies more on emotion and stated intent with weaker verifiable repayment history, which aligns with higher default risk signals, whereas Text #1 presents a documented payment history that mitigates default risk. The study logic aligns with selecting Text #2 as the higher-risk option, given its lack of objective repayment evidence when compared to Text #1.

SP2025.B69.DAT.562.24 COMPLETE Quiz #2 for VIDEO 1: Predicting Loan Defaults

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