This research contrasts the perceptions of consumers with those of loan officers faced with similar credit application situations. Fundamental misperceptions of the credit granting process are encountered. Consumers clearly misperceive the credit standards of both banks and finance companies. Given large interest rate differentials between loan sources and the narrow shopping scope of most consumers for consumer credit, equitable allocation of credit dollars demands greater appreciation of the nature of the credit evaluation process by lender and borrower.
Retail outlets and finance companies were the first businesses to offer consumer installment credit, and for many years they enjoyed a virtual monopoly in that area. This situation has changed. There has been a gradual but continual decrease in their percentage of market share, and a corresponding increase in that held by commercial banks and credit unions. This study seeks to explain this change in market share, to measure the effects of selected supply and demand variables which may have contributed to it, and to assess the potential ramifications for the above lenders and the borrowing public at large.
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