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Design Matters - Learning from Consumers Experiences with Small-Dollar Loans

Authors
Rachel Schneider

Reliable access to high-quality small-dollar credit (SDC) is vital to the financial success of millions of U.S consumers. Yet many SDC products, especially those within reach of consumers with limited or low credit scores, carry terms that do not support a successful repayment but instead put borrowers at risk of becoming trapped in mounting cycles of debt.

To understand consumers’ needs, preferences and experiences with small dollar credit, the Center for Financial Services Innovation, with support from the Ford Foundation, conducted both qualitative and quantitative research with SDC consumers. This research is part of CFSI’s vision to advance quality innovation in the consumer credit marketplace and to inform the development of a new generation of SDC products.

Among the findings, it revealed that beyond quick access to funds and clear terms, borrowers also value certain loan features, including the length and the price of the loan, repayment policies, and related aspects of customer service. Thus, the quantitative data suggests it is the overall loan structure that defines loan quality for many borrowers.

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