We study the interaction between the policy of
mandatory disclosure of annual percentage rate (APR) and the level of financial education of the
borrowers. We use a detailed measure of financial education based on the
economic content covered in the higher education programs enrolled by the
borrowers. We combine our individual-level data of financial literacy with data
on the universe of loans in Chile. We estimate difference-in-differences
regressions to study the impact of the policy on interest rates, loan amounts
and loan term of the financially educated consumer relative to uneducated
consumers. Our findings suggest that the disclosure policy triggered a sizable
gap in interest rates between the financially educated and uneducated of 90 basis
points, that is about 5 percent of the average interest rate of the population.
JEL codes: D12 D14 D18 K2.