Need a Loan? Try Not to Appear Too Successful

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Attractive people enjoy a lot of advantages in life. Handsome men earn 13% more over a lifetime their than their “looks-challenged” peers, research has found. Good-looking people of both genders may also be more likely to find jobs, and people tend to assume they are successful, friendly, intelligent, and trustworthy. But new research suggests there are times when appearing successful and attractive could be a disadvantage.

Researchers at Fordham University wanted to find out how people using peer-to-peer lending sites made decisions about who was worthy of credit. Yuliya Komarova, an assistant professor of marketing, and Laura Gonzalez, an assistant professor of finances, set up a simulated lending site called Lendi. Lenders viewed profiles of potential borrowers, which featured basic information like a photo, how much money they wanted to borrow and why, and their credit rating.

When Komarova and Gonzalez looked at which borrowers received money from lenders, they made some interesting discoveries. Men were less likely to offer loans to men who appeared to be financially and professionally successful and had great credit ratings – all qualities that logic says would make them good candidates for a loan. Female lenders, on the other hand, were less inclined to loan money to attractive women. When asked why they rejected certain applicants, study participants made comments like “doesn’t look like a responsible man” and “a bit of a party guy.” The effect disappeared when men were loaning money to women and women were lending to men.

Chalk up the bias to our competitive natures. The lending decisions made by the study’s participants may have an evolutionary basis, said Komarova. Men were likely to perceive the successful men as rivals, and they experienced a dip in confidence when viewing those profiles. That bad feeling took the form of a negative “gut reaction” to borrowers, which led lenders to ignore requests for a loan.

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“In the absence of objective information [or in a time crunch], visceral reactions often guide our decisions — that is, that immediate sense of this ‘feels right’ or ‘feels wrong,’” Komarova said in a statement. “However, these intuitions about this borrower can be based on completely random factors.”

Perhaps it’s not all that surprising men would take steps – even subconscious ones – to try to take down perceived rivals. It seems to go hand-in-hand with other studies showing that men who perceive themselves to be less attractive or who have fewer financial resources tend to take more financial risks, perhaps in an attempt to get a leg up on their more genetically blessed or financially secure peers.

Yet there’s also evidence that in some situations, being attractive helps prospective borrowers. Researchers at the Hong Kong University of Science and Technology looked at how quickly borrowers on microfinance site Kiva received money. The results revealed some pretty clear bias on the part of lenders, Pacific Standard reported.

“We find that charitable lenders on a large, peer-to-peer online microfinance website appear to favor more attractive, lighter-skinned, and less-obese borrowers,” the study’s authors wrote. Women were also more likely to receive funding than men.

The bias the researchers documented could mean that “direct philanthropy may thus be less efficient at allocating resources to maximize social impact” than more traditional forms of charitable giving. Given that direct giving initiatives like Kiva are becoming an increasingly important part of the philanthropic landscape, that’s a bias that could have a direct effect on many people in need of help.

Whether people are being punished for being good-looking or enjoying an unfair advantage because of their perceived beauty, it seems that individual lenders often base their decisions on factors that have nothing to do with finances.

Follow Megan on Twitter @MeganE_CS
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