A friend or relative of yours needs money and hits you up. Please, they say. As God is my witness, I’ll pay you back! Promise!
And with that, the alarm bells should start ringing. Because as soon as a prospective borrower mentions God, the chances of that person not bothering to repay the loan go up dramatically.
You might think — or at least hope — that a polite, openly religious person who gives his word would be among the most likely to pay back a loan. But in fact this is not the case. This type of person, the data shows, is less likely than average to make good on their debt.
How does he know? Because, Stephens-Davidowitz explains,
Recently, three economists — Oded Netzer and Alain Lemaire, both of Columbia, and Michal Herzenstein of the University of Delaware — looked for ways to predict the likelihood of whether a borrower would pay back a loan. The scholars used data from Prosper, a peer-to-peer lending site. Potential borrowers write a brief description of why they need a loan and why they are likely to make good on it, and potential lenders decide whether to provide them the money. Overall, about 13 percent of borrowers defaulted on their loan.
The paper in question is here.
It turns out the language that potential borrowers use is a strong predictor of their probability of paying back. And it is an important indicator even if you control for other relevant information lenders were able to obtain about those potential borrowers, including credit ratings and income.
The researchers found multiple phrases that indicate a borrower may be a little dodgy in the repayment department, including God, promise, will pay, thank you, and hospital. Says Stephens-Davidowitz,
The more assertive the promise, the more likely he will break it. If someone writes “I promise I will pay back, so help me God,” he is among the least likely to pay you back. Appealing to your mercy — explaining that he needs the money because he has a relative in the “hospital” — also means he is unlikely to pay you back. In fact, mentioning any family member — a husband, wife, son, daughter, mother or father — is a sign someone will not be paying back.
The effect is especially pronounced when the Almighty is referenced.
Someone who mentions God was 2.2 times more likely to default. This was among the single highest indicators that someone would not pay back.
As Polonius instructed his son, Laertes, in Hamlet, “Neither a borrower nor a lender be; for loan oft loses both itself and friend.”
Now we know that that’s easily twice as likely when God botherers come a-knocking.
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