Tools: Alternative Small Dollar Loan Toolkit
Chicago Appleseed was pleased to partner with the Illinois Asset Building Coalition in the development of the Alternative Small Dollar Loan Toolkit (ASDL Toolkit).
The ASDL Toolkit serves as a resource for banks and credit unions interested in offering a safe, profitable, small dollar loan (SDL) product. Informed by research, focus group testimony, and product analyses, the ASDL Toolkit provides a coherent summary of the SDL landscape and the resources necessary to create a safe small dollar loan.
Each year over 12 million Americans became trapped in the cycle of debt thanks to predatory payday loans. Payday loan consumers get cash in exchange for providing a personal check or authorizing an automatic debit deduction for the borrowed amount plus a finance charge. As it is legal to charge up to 400% in fees and interest, many payday loan consumers must take out additional payday loans, a process called churning, to pay for previous loans or to make ends meet after paying the high fees and interest from the previous loan. An alternative to payday loans, SDLs have arisen as a means for customers to obtain necessary credit to pay bills and bridge financial gaps.