Homeownership and high-cost alternative borrowing

Homeowners are generally less likely to use short-term alternative loans such as payday loans, car title loans, and tax refund anticipation loans but this association has not been fully explored across all income groups and in the context of other homeownership characteristics. Using the 2009 U.S. National Financial Capability Study, this study shows that homeownership generally reduces the propensity for high-cost alternative borrowing across all income quintiles. However, home purchases made within the 5 years prior to 2009 increased the probability of alternative borrowing in the bottom two quintiles. Also, apart from the bottom quintile, homeowners with adjustable-rate mortgages are more likely to resort to alternate loans compared to those without such mortgages. Surprisingly, those with home equity loans in the lower quintile are more likely to have used AFS loans as well.