In this season of giving and good cheer, it seems to make sense to give notice to the financial realities that challenge residents on a day-to-day, paycheck to paycheck basis.  A new study by the Center for Financial Services Innovation / CFSI, supported by funding from the Ford Foundation, identified four primary consumer need cases in the small dollar credit markets, each representing a distinct borrower profile and different uses of small-dollar credit. The need cases are:

1. Unexpected Expense borrowers tend to access credit infrequently for relatively larger expenses related to an unexpected or emergency event, such as a car repair.

2. Misaligned Cash Flow borrowers take out smaller amounts somewhat frequently to pay bills and meet regular household expenses when their income and expenses are mistimed.

3. Exceeding Income borrowers’ expenses regularly exceed their income and these consumers tend to be among the most frequent users of credit, accessing small amounts for everyday expenses.

4. Planned Purchase borrowers are a smaller but important niche group of users in the SDC market who make a relatively large, planned purchase, commonly related to a personal asset.

We can generalize that small dollar credit consumers are also today’s residents who are conditionally approved based on credit, many of whom may be vulnerable to the burden of unexpected expenses and/or misaligned cash flow.  Extending the spirit of the holidays year-round, successful property owners and managers can help this segment of their renter populations by introducing solutions to safeguard their payroll so that rent can be paid on time and as such, perhaps, their need for small dollar loans can become less frequent.

- See the full CFSI study at: http://www.cfsinnovation.com/content/why-consumers-are-turning-small-dollar-credit