What is a Dollar-Small Loan? This loan does not require you to have a good credit history or even a credit history. As long as you are eligible, you can get this loan. Fortunately, it is not offered by lenders but by national banks, credit unions, and community banks.
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Small-dollar loan are short-term, partial payment loans that are designed for borrowers with limited or no credit history, offering an affordable and accessible credit option. This loan creates an allied-regulated alternative to costly payday loans. It is also a substitute for borrowers who cannot get low personal loan rates due to their credit history.
How Do Small-Dollar Loans Work?
To prevent acquisitive behavior, this loan is managed federally as a part of the SDL Program at the state level. A part of the program allows financial institutions to apply for this loan grant with the federal government. Also, the agreement guarantees that the loans made with the funds meet a particular requirement indicated by the federal guidelines.
Some states demand a flat fee for the complete loan, while others demand a lower pricing fee or a fixed percentage. The structure of the fees varies based on the institution issuing the loan. In addition, Small-dollar loans must comply with certain standards and criteria established by the SDL program. If you decide to get a small loan that isn’t under the Small-Dollar Loan (SDL) program, it is not federally protected.
Examples of Small-Dollar Loans
This loan is offered by a wide range of institutions, and because of this, the loans will be different from each other. These examples must fall under federal guidelines and not surpass $2,500. Meanwhile, below are some examples of small-dollar loans to give you an idea of what they look like.
Loan details | Wells Fargo | Bank of America | U.S bank |
Maximum loan amount | $500 | $500 | $1,000 |
Repayment term | 4 monthly installments | 3 monthly installments over 90 days | 3 monthly installments |
Interest rates | None | None | None |
Fees | $12 or $20 flat fee | $5 flat fee | $6 fee for every $100 borrowed. |
Monthly payments | $130 | $168.30 | $353.30 |
These few show what this loan looks like, and by just getting familiar with them, getting this loan won’t be much of a problem.
Where to Get Small-Dollar Loans
This loan isn’t as popular as traditional personal loans. Also, they aren’t given by all financial institutions, only by community banks, national banks, and credit unions. Due to years of growth, small-dollar loans are now more accessible than before.
What is the maximum amount I can borrow with small-dollar loans?
This loan ranges from $50 to $2,500; therefore, the maximum amount you can borrow is determined by the institution you are borrowing from. Irrespective of the institution, it cannot surpass the federal limit of $2,500.
Am I Eligible for a Small-Dollar Loan?
There are a few things to consider to be eligible for this loan. Unlike other loans, you are not required to have a good credit history. However, to qualify for a small-dollar loan, your organization must fall under these requirements:
- Your organization should be in partnership with two or more certified CDFIs.
- Your organization should be a certified CDFI.
- There should be a partnership between a certified CDFI and a federally insured depository institution with the key mission of serving earmark investment areas.
Now you can confirm if you are eligible for this loan. Getting this loan should not be a problem if your organization is eligible for a small-dollar loan.
How to Apply for a Small-Dollar Loan
One of the easiest things to do after the eligibility process is to apply for a loan. Also, there are five basic steps to applying for this loan. All you need is the right information to make this process easier to complete.
Certification
Firstly, here, you need to confirm all your certifications and check if you have everything required to proceed with the application process.
Application process
This marks the start of your application for a small-dollar loan. To proceed, please provide essential information from the pre-application webinar for FY 2024, along with the accompanying materials from the FY 2024 round.
Award Announcement
The U.S. Treasury invested $18 million on April 16, 2024, to expand consumer access to financial institutions through the CDFI small-dollar loan program, promoting financial inclusion and stability.
Closing and Disbursement
When you get to this step, you will have to provide the closing and disbursement documents that were stated during your application process.
Compliance and reporting
In this step, the necessary documents should be provided for the completion of the loan application.
As long as every document required is provided, you can take part in the small-dollar loan.
What is the Small-Dollar Rule?
The small-dollar loan regulation applies to partial payment transactions in retail settings, provided the transaction qualifies as a covered loan, promoting clarity and consumer protection. Also, this rule states that, after two successive failed payment attempts, the lender needs to get new concurrence from the borrower.