New Laws, Lenders Boost Access to Affordable Small Loans

Written by: Annie Millerbernd  
Published: May 24, 2022

Inflation has come down especially hard on people already struggling to put gas in their tanks and groceries in their refrigerators. For many, a payday loan may seem like the only way to get necessary cash.

In recent years, however, as more states set restrictions on risky, short-term loans, new lenders offering lower-cost small loans have cropped up, making it easier than before to find an affordable loan that won’t drag you into unmanageable debt.

In some states, new laws mean better loans

There is currently no federal law for maximum interest rates on small-dollar loans; rather, states decide whether to cap payday loan rates. As a result, the cost to borrow a few hundred dollars often depends on where you live.

In recent years, four states — Colorado, Hawaii, Ohio and Virginia — have passed laws that effectively lower the cost of small loans and give borrowers longer repayment terms. A study by The Pew Charitable Trusts released in April found that even under the reforms, payday lenders continued to operate, but with safer loans.

Though some new lenders started doing business in these states once the laws took effect, the main impact was that existing payday lenders consolidated storefronts and made their loans more affordable, says Alex Horowitz, senior research officer with Pew.

Full article can be accessed at:
https://www.nerdwallet.com/article/loans/personal-loans/find-affordable-small-dollar-loans?utm_campaign=2022-06-09+FSP&utm_medium=email&utm_source=Pew&subscriberkey=0037V00002XdRcWQAV\