With so many consumer and user guides available out there – on a wide variety of subjects – one might wonder what good a guide to smaller dollar loans might be. As it turns out, though, there are millions of people who rely on smaller dollar lines of credit in order to get by financially from one week to the next. As such, it is in the best interest of both borrowers and lenders to have a thorough understanding of small dollar loans in order to be successful. If you regularly take out loans, you need to understand how these types of loans work. And if you are a lender, it is important to understand how to best serve your clientele. What follows is a short guide to help consumers (and some of you in the lending industry) to better understand small dollar lines of credit.
As was already stated, millions of people make use of small dollar loans and other lines of credit every year. In 2012, it is estimated that US consumers spent in excess of $41 billion on these types of financial solutions. Being able to borrow a relatively small amount of money, with terms that are favorable for borrowers, helps those borrowers to build positive credit scores. These types of loans also help borrowers to get through financial emergencies and result in people getting a better overall understanding of how to positively impact their finances through strategic borrowing.
The Downside of Small Dollar Loans
Just as there are millions of people who routinely make use of smaller dollar lines of credit, there are millions of people who do not have access to short term, small dollar loans, or they only have access to lower quality, higher cost small dollar loan. Many industry insiders believe that there is a great opportunity right now for providers of affordable small dollar loans to step up to the plate and to offer their services to those who do not have access to better quality short term loans. It is up to the people who work behind the scenes in this industry to create product offerings that provide consumers with the financial products that they demand. As such, many hope to see somewhat of a revolution in the smaller dollar lending industry in the near future.
Responsible Lending and Responsible Borrowing
Any type of lending situation is a two way street; both lenders and borrowers must practice responsible behaviors in order to improve the small dollar lending offerings that will be made available to consumers in the months and years to come. Lenders must work to offer affordable financial services and lines of credit to their clients, while borrowers must practice due diligence to understand the terms of their loans and to pay back lenders on a timely basis. This is all very basic, but bears repeating in light of a consumer’s guide to smaller dollar loans.
Consumers who plan on taking out small dollar loans in the future need to know that they have more choices now than ever. They also need to know that they should take the time to understand all of the terms of any loans they decide to take out, including all fees that they may be responsible for. Finally, both lenders and the people that they lend to, need to maintain an open line of communication from the moment the loan application is submitted up until the time the loan is paid back in full. Only then will smaller dollar loans be able to stand up to the ever-growing scrutiny of both the mass media and elected policymakers.
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