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Short-Term, Small-Dollar Lending: Policy Issues and Implications

Short-Term, Small-Dollar Lending: Policy Issues and Implications

Appendixes

Overview

Short-term, small-dollar loans are consumer loans with reasonably low initial major amounts (frequently significantly less than $1,000) with fairly quick repayment durations (generally speaking for only a few days or months). Short-term, small-dollar loan items are frequently employed to pay for cash-flow shortages which could happen because of unanticipated costs or durations of insufficient earnings. Small-dollar loans are available in different kinds and also by a lot of different loan providers. Banking institutions and credit unions (depositories) will make small-dollar loans through lending options such as for example bank cards, charge card payday loans, and account that is checking protection programs. Small-dollar loans can certainly be supplied by nonbank loan providers (alternative financial solution AFS providers), such as for example payday lenders and vehicle name lenders.

The level that debtor situations that are financial be made worse through the usage of costly credit or from restricted usage of credit is commonly debated. Customer teams frequently raise concerns about the affordability of small-dollar loans. Borrowers spend rates and costs for small-dollar loans which may be considered high priced.