Abstract: It is widely documented that firms that borrow money at a higher loan interest rate have higher default probability than those who borrow money at a lower interest rate. However, I find that consumers who choose a pair of a high interest rate and low collateral among an available loans are less likely to default than those who choose a pair of a low interest rate and high collateral, advantageous selection in the consumer credit market. After the 1997 Asian financial crisis, Korean credit market had gone through a huge consolidation initiated by the government authority, resulting in high concentration in the consumer loan market. I prove the highly concentrated consumer credit market, based on the idea from Chiappori, Jullien, Salanié and Salanié (2006) studying the insurance market, provides an environment in which an additional dimension of heterogeneity may cause advantageous selection. And then, I find a source of the advantageous selection in the consumer credit market and how it causes a negative correlation between a loan interest rate and default probability. Consumers with low IES tend to choose a pair of a high interest rate and low collateral since their willingness to pay interest cost to reduce collateral requirement by one unit is higher than those with high IES. At the same time, consumers with low IES exert more costly effort to reduce default probability since their opportunity cost of being excluded from the credit market is higher, resulting in the negative correlation between a loan interest rate and default probability. I explicitly show that this unobserved IES is the source of the negative correlation by constructing a proxy of IES using a unique dataset including not only bank loan but also balance of savings account and credit card consumption history for each consumer. Furthermore, I give an empirical evidence showing that consumers with lower IES indeed exert more costly effort to avoid default by separately identifying moral hazard from adverse selection.