Payday lenders have embraced installment loans to evade regulations – but they may be even worse
Installment loans seem like a kinder, gentler version of their “predatory” cousin, the payday loan. But for consumers, they may be even more harmful.
A little cash can be costly. AP Photo/Sid Hastings https://creativecommons.org/licenses/by-nd/4.0/
Use of the installment loan, in which a consumer borrows a lump sum and pays back the principal and interest in a series of regular payments, has grown dramatically since 2013 as regulators began to rein in payday lending. In fact, payday lenders appear to have developed installment loans primarily to evade this increased scrutiny.
A closer look at the differences between the two types of loans shows why we believe the growth in installment loans is worrying – and needs the same regulatory attention as payday loans.
Possible benefits
At first ...