NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Repossession and the Democratization of Credit

Juliano J. Assunção, Efraim Benmelech, Fernando S. S. Silva

NBER Working Paper No. 17858
Issued in February 2012
NBER Program(s):   CF   LE   ME

We exploit a 2004 credit reform in Brazil that simplified the sale of repossessed cars used as collateral for auto loans. We show that the change has led to larger loans with lower spreads and longer maturities. The reform expanded credit to riskier, low-income borrowers for newer, more expensive cars. Although the credit reform improved riskier borrowers' access to credit, it also led to increased incidences of delinquency and default. Our results shed light on the consequences of a credit reform, highlighting the crucial role that collateral and repossession play in the liberalization and democratization of credit.

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Document Object Identifier (DOI): 10.3386/w17858

Benmelech, Efraim, Juliano Assuncao and Fernando S. S. Silva. Forthcoming. Repossession and the Democratization of Credit. Review of Financial Studies.

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