This paper examines how heatwave exposure affects consumer loan outcomes using loan-level data from four major European economies: France, Germany, Italy, and Spain. Exploiting regional and temporal variation in extreme heat, I implement a difference-in-differences design to estimate causal impacts on loan pricing and performance. Loans originated after heatwaves carry modestly higher interest rates and significantly higher default rates in the following months. These effects are concentrated among lower-income borrowers, the self-employed, and urban areas. While lenders adjust pricing slightly, the increases in default are larger and not fully aligned with pricing changes. The results suggest that short-term climate shocks can impair borrower performance and are only partially reflected in loan contract terms.
