By Paige Marta Skiba and Caroline Malone
Installment loans appear to be a kinder, gentler form of their “predatory” relative, the pay day loan. However for customers, they may be a lot more harmful.
Utilization of the installment loan, by which a customer borrows a lump sum payment and pays straight back the key and fascination with a number of regular repayments, has exploded considerably since 2013 as regulators begun to rein in payday financing. Actually, payday loan providers may actually are suffering from installment loans mainly to evade this scrutiny that is increased.
A closer glance at the differences when considering the 2 forms of loans shows why we think the development in installment loans is stressing – and requires the exact same regulatory attention as payday advances.
At first, it looks like installment loans might be less harmful than payday advances. They tend become bigger, are repaid over longer durations of the time and in most cases have actually lower annualized interest levels – all things that are potentially good. (more…)