Fact Sheet Small-Dollar Credit: Consumer Needs and Industry Challenges
Signe-Mary McKernan, Caroline Ratcliffe, Caleb Quakenbush
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Managing finances can be a tightrope walk, especially for low- and moderate-income families. To deal with these challenges, many households turn to expensive small-dollar credit. This brief, based on a convening of 25 small-dollar credit researchers, credit union experts, and bank representatives, discusses the opportunities and challenges of providing small-dollar credit products. Ability to repay, flexibility, and transparency are important features for consumer success. Products that bundle credit with savings provide pathways to greater financial stability. Small loan amounts, the costs of underwriting and servicing loans, and regulatory and reputational risks pose challenges to providers.
Research Areas Wealth and financial well-being Families
Tags Asset and debts Economic well-being Opportunity and ownership Family credit and debt
Policy Centers Center on Labor, Human Services, and Population