No Loan Comes Without a Price: Financial Literacy, Mental Health, and Consumer Loan Use Among Young Adults in Sweden

In Sweden, the number of young people taking consumer loans is growing. The reasons behind this increase remain unclear and may be explained by both financial and psychological factors. The purpose of the study was therefore to examine to what extent financial literacy, social and emotional loneliness and mental health were associated with the likelihood of having debt from consumer loans, after controlling for gender, educational level, and age. The study was based on an online survey comprising young adults (<i>n</i> = 2057) aged 18-29. Binary logistic regression analyses were conducted to identify the strongest associated factors of having debt from consumer loans. Lack of financial literacy and gender were the strongest associated factors. Men were twice as likely as women to have taken consumer loans. Anxiety and depressive symptoms, social and emotional loneliness, and age also emerged as significant associated factors. Educational level was not related to having debts from consumer loans. Overall, the results suggest that both financial and psychological aspects play a role in the likelihood of taking out consumer loans. Future research should investigate the causal pathways underlying these associations.