Extreme Temperatures and Low-Income Household Finance: Evidence from Payday Loans”
Victoria Wenxin Xie , Shihan Xie and Xu Zhang
Abstract:
Extreme temperature shocks, intensified by climate change, are increasingly frequent and severe. Yet their impact on household finances remains under-explored. Using loan-level payday loan data, we show that extreme temperature shocks lead to household financial distress, reflected in increased loan demand, reduced credit access, along with rising delinquency and default rates. We investigate the mechanisms behind this distress using borrower income data and the differences between online and storefront lenders. In the absence of federal aid for such events, the unmet demand for high-cost credit and deteriorating loan performance highlight the need for targeted policy interventions.
Jul 15, 2025