By JLP | December 29, 2010
I’m working my way through Meir Statman’s interesting book, What Investors Really Want: Know What Drives Investor Behavior and Make Smarter Financial Decisions. In chapter three of the book, the author makes the following statement:
Beauty matters in life and loans alike. Beautiful applicants are more likely to get loans and pay lower interest rates than less attractive applicants with the same financial information. Moreover, loans to beautiful loan applicants are bad investments because beautiful borrowers are much less likely to repay their loans than less attractive borrowers. Lenders to beautiful borrowers give up the utilitarian benefits of high interest rates and high likelihoods of being paid because they are fooled by the positive sentiment exuded by beautiful applicants. Or perhaps they are not fooled at all. Perhaps they willingly give up the utilitarian benefits of high interest rates and steady loan repayments for the expressive and emotional benefits of associating themselves with beautiful people.
The author references this paper, which you can download (I have not read the paper).
I thought the paragraph was interesting. Perhaps beautiful people get the benefit of the doubt because they appear to take care of themselves. It’s really no different that the advice we normally hear about dressing your best for a job interview. Employers typically don’t want to hire an “ugly” person even if their credentials are outstanding. Maybe this same thought process carries over into other parts of life. Maybe less-attractive people would do better to do business with QuickenLoan.com where face-to-face contact is not necessary.