Small-Dollar Lending

CSL's Small-Dollar Lending Initiative is helping our community rethink how low-income families access and use credit in their lives.

The Issue

Financially, we are all viewed and judged by a three-digit rating, and that's our credit score. If our score is, say, 750, we can access credit with ease and finance things like cars, homes, education, and much more. If our score is 450, it is going to be very difficult to access credit, and we are likely to turn to toxic lending operations like payday loans, title loans, etc. The interest rates on toxic loans can be more than 400% APR.

The Solutions

Getting rid of toxic lending operations completely does not solve the issue. Community solutions must involve ways to expand credit, at reasonable rates, to all people. If low-income families can better access credit, they can invest in themselves by getting reliable transportation to work, getting loans to further their education, and maybe someday buying a home.

Our Initiative

In 2014, CSL partnered with Holy Rosary Credit Union to launch a Small-Dollar Lending (SDL) Initiative. It was designed as a way to extend reasonable credit to individuals with low credit scores. Holy Rosary provides the loans, and CSL backs the loans in the event of a default, and wraps the loan recipients with support, including Financial Coaching.

Outcomes

Since 2014, the SDL Initiative has accomplished the following:

- nearly $500,000 in loans made

- more than 160 loans extended (average loan size of about $3,125)

- loans made for vehicle purchase, refinance existing toxic loans, and other small-dollar needs
- for refinanced toxic loans, the average APR the borrower previously had was 275%

- no one in the Holy Rosary loan program pays more than 21% APR

- the average interest rate for the Holy Rosary loan program is 14%

- the average credit score across our portfolio is 490

- the average borrower that refinances a toxic loan is saving more than $1,000 in interest and fees by getting out of their toxic loan

- the portfolio has a charge-off rate of only 6.4%

Learn More

Contact CSL's Vice President of Financial Coaching, Rachel Barker, at (816) 254-4101 or via email.

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