News Summary

• Extreme temperature shocks increase demand for high-cost credit, reduce payday loan credit availability, and worsen loan performance through higher delinquency and default rates.
• We explore potential mechanisms using borrower income information and differences between online and storefront lenders.
• Our findings reveal how extreme temperature events can amplify financial vulnerability among credit-constrained households, particularly in the absence of formal disaster assistance for such events.
• The authors gratefully acknowledge financial support from the Alfred P.
• Sloan Foundation through the NBER Household Finance Small Grant Program.
• We thank Jason Allen, Dan Bernhardt, Richard Carson, Matthew Cole, Tatyana Deryugina, Julia Fonseca, Jean-Sebastien Fontaine, Itay Goldstein, Kris Mitchener, Amine Ouazad (discussant), Toan Phan, Juan Sanchez, Brigitte Roth Tran, Liyan Yang.