The Influence of Income and Lifestyle on Online Loan Usage Decisions with Financial Literacy as a Moderating Variable among the Millennial Generation in West Java Province

Abstract

Purpose: This study aims to examine the effects of Income and Lifestyle on Online Loan Usage Decisions among the Millennial Generation in West Java Province. Furthermore, this study investigates the moderating role of Financial Literacy in explaining the relationships between Income, Lifestyle, and Online Loan Usage Decision. Research Design: This study employed a quantitative research approach using an explanatory research design to examine the causal relationships among the proposed variables. Research Setting and Duration: The study was conducted among the Millennial Generation residing in West Java Province, Indonesia. Data were collected through an online survey during the 2026 research period. Methodology: Primary data were collected using a structured questionnaire distributed online to Millennials in West Java Province who met the predetermined sampling criteria. A purposive sampling technique was employed, resulting in 100 valid respondents. The measurement instruments for Income, Lifestyle, Financial Literacy, and Online Loan Usage Decision were adapted from established theories and previous empirical studies. Data were analysed using SmartPLS 4 based on the Partial Least Squares Structural Equation Modelling (PLS-SEM) approach. The analysis included the assessment of the measurement model through indicator reliability, convergent validity, discriminant validity, and internal consistency reliability, followed by an evaluation of the structural model and hypothesis testing using the bootstrapping procedure. Findings: The results indicate that Income has a significant negative effect on Online Loan Usage Decision, whereas Lifestyle and Financial Literacy have significant positive effects on Online Loan Usage Decision. Furthermore, Financial Literacy significantly moderates the relationship between Income and Online Loan Usage Decision by strengthening the negative effect of Income and the relationship between Lifestyle and Online Loan Usage Decision by weakening the positive effect of Lifestyle. The structural model also demonstrates satisfactory explanatory power and predictive capability, indicating that the proposed model effectively explains online loan usage decisions among Millennials in West Java Province. Conclusion: The findings confirm that economic, behavioural, and financial capability factors play important roles in shaping online loan usage decisions. Individuals with higher income tend to be less likely to use online loan services, whereas a more consumption-oriented lifestyle increases the likelihood of using online loans. In addition, higher financial literacy encourages more rational borrowing decisions while strengthening the negative effect of income and weakening the positive effect of lifestyle on online loan usage decisions. This study contributes to the literature on digital financial behaviour by integrating Income, Lifestyle, and Financial Literacy into a single research model and highlights the importance of financial literacy in promoting more responsible and informed online borrowing decisions.