Short-term, small-dollar loans are consumer loans with reasonably low initial major amounts (frequently significantly less than $1,000) with brief payment durations (generally speaking for a small amount of months or months). 1 Short-term, small-dollar loan items are commonly used to cover income shortages which could happen as a result of unanticipated costs or durations of insufficient earnings. Small-dollar loans could be offered in different kinds and also by a lot of different lenders. Federally insured depository institutions (i.e., banking institutions and credit unions) could make small-dollar loans via financial loans such as for instance charge cards, charge card cash advances, and bank checking account overdraft protection programs. Nonbank lenders, such as for example alternate monetary solution (AFS) providers ( e.g., payday loan providers, vehicle name lenders), provide small-dollar loans. 2
The expense related to small-dollar loans look like greater in comparison to longer-term, larger-dollar loans.