The Center for Financial Services Innovation (CFSI) conducted a
study that found about 15 million consumers used at least one
small-dollar credit product in the past year. A small-dollar credit
product is typically a small loan that must be repaid in a short
amount of time and is often used by consumers between paychecks.
These products can include payday loans, pawnshop loans, direct
deposit advance loans, auto title loans and nonbank installment
The study included a survey of more than 1,100 consumers who had
used these kinds of loans: Key factors as to who makes up this
demographic are illustrated below.
According to the survey, 66 percent of small-dollar credit
consumers had no savings, 59 percent had a high school education or
less, and only 27 percent had a credit card. If this is a
demographic that struggles with getting and establishing credit,
then short-term, small-dollar loans would be appealing to them as
most do not require a credit check.
The survey also asked respondents to indicate why they used a
small loan, and paying utility bills was No. 1 on the list at 36
percent. Rounding out the top three were using the loan for living
expenses (34 percent) and rent (18 percent). The top reasons they
needed the cash in the first place? Their living expenses were
consistently more than their income, they had a bill or payment due
before they received their paycheck or they experienced unexpected
events such as medical emergencies.
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