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



Short-term, small-dollar loans are consumer loans with reasonably low initial major amounts (frequently lower than $1,000) with reasonably repayment that is short (generally speaking for only a few weeks or months). Short-term, small-dollar loan items are commonly used to pay for cash-flow shortages which will happen because of unforeseen costs or durations of insufficient earnings. Small-dollar loans is available in various types and also by various kinds of loan providers. Banking institutions and credit unions (depositories) could make small-dollar loans through lending options such as for example bank cards, bank card payday loans, and bank account overdraft security programs. Small-dollar loans can certainly be given by nonbank loan providers (alternative service that is financial providers), such as for example payday loan providers and vehicle name loan providers.

The degree that debtor monetary circumstances would be produced worse through the utilization of high priced credit or from limited use of credit is commonly debated.

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