Pew Report Confirms Benefits of Installment Lending
The Pew Charitable Trusts released a report on installment loans entitled State Laws Put Installment Loan Borrowers at Risk: How outdated policies discourage safer lending. It is important to note that this title is misleading to readers and negates a generally positive report on installment lending and the important role it plays in the lives of millions of Americans.
The report confirms what AFSA has long known to be true for over 100 years―installment lenders offer an affordable, responsible form of credit to under-served borrowers, without requiring access to borrowers’ checking accounts.
Pew’s research found that:
- Approximately 85% of installment loans have monthly payments of 5% or less of a borrower’s monthly income and payments are structured to create a pathway out of debt;
- $500 installment loan with a term of several months is three to four times less expensive than a payday or title loan; and that
- Whereas payday and title lenders rely on unaffordable payments to drive profitability, installment lenders and borrowers both benefit when loans are repaid on schedule.
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October 18th, 2018 by Dan Bucherer