Relationships and rationing in consumer loans

We empirically examine how relationships between individual households and their creditors affect the probability of being credit-rationed. Using a data set where the credit-rationing of individual households is observed directly, we show that relationship duration and the number of activities between a family and a potential lender significantly lower the probability of being credit-rationed. Additionally, we examine the relative role of relationships in determining the interest rates of two consumer loans-a mortgage loan and a "special purposes" loan-and show that mortgage loan rates are driven less by relationship factors than the special purposes loan rates.