Understanding personal loan repayment intention among working adults in Malaysia: an exploratory study

Purpose The purpose of this research is to identify the psychological factors influencing personal loan repayment intention. The concept is examined in an exploratory study within the context of perception under the theory of planned behavior (TPB). Design/methodology/approach Guided by the TPB, this study examines attitude, injunctive and descriptive norms, and reconceptualizes perceived behavioral control as financial self-efficacy to explain personal loan repayment intention. Construct validity and reliability were assessed using confirmatory factor analysis. To test the research questions, 462 responses were collected, of which 443 were valid and included in this study. Findings The study shows that working adults’ attitudes and financial self-efficacy strongly influence their intention to repay a personal loan. The most preferred descriptive norms directly influence attitude and financial self-efficacy. Similarly, financial self-efficacy also influences attitude. Observing peers’ and family members’ repayment behaviors appears to influence borrowers’ attitudes and enhance their confidence in managing finances, thereby strengthening their intention to repay. Research limitations/implications The study relies on self-reported, cross-sectional data, which may be affected by social desirability bias. Practical implications The paper provides important insights for the financial institutions, social networks and borrowers in understanding and improving the intention of loan repayment behavior in the financial markets. Social implications Financial institutions and policymakers could implement interactive budgeting simulations or mastery-based financial workshops that directly enhance individuals’ confidence in managing debt. Next, public awareness campaigns should shift from prescriptive to descriptive messaging. Originality/value This paper contributes to the personal finance and banking literature by refining the TPB by including financial self-efficacy to better explain personal loan repayment intention.