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Factors Affecting Borrowing

Factors Affecting Borrowing IGCSE Economics

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Factors affecting borrowing — quick explainer

Availability of loans & overdrafts
  • How willing banks are to lend; access to credit lines/overdrafts.
  • Depends on credit checks, collateral and bank lending policy.
  • More availability ? easier to borrow.
Rate of interest
  • The cost of borrowing money.
  • Lower rates encourage borrowing; higher rates discourage it.
Confidence
  • Expectations about future income, jobs and profits.
  • Higher confidence ? people/firms more willing to take on debt.
Social attitudes
  • Cultural views toward debt (stigma vs acceptance).
  • Family/peer influence and norms can raise or reduce borrowing.
How it all connects
  • Borrowing tends to rise when credit is available, rates are low, confidence is high and attitudes are supportive.
  • The opposite conditions reduce borrowing.
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