Commitment to Action

Improving the Underwriting of Small Dollar Credit

Commitment by

Alternatives Federal Credit Union

In 2014, Alternatives Credit Union ('Alternatives'), partnering with Innovations for Poverty Action (IPA), commited to roll out a small dollar loan program called the 'Back on Track Loan.' This new approach to small dollar lending requires the borrower to provide documentation for unforeseen needs for credit (e.g. invoice from a mechanic for car repair) for the purpose of better understanding the needs of the borrower and explore risk-adjustments in pricing of credit based on the purpose of the loan. The initial pilot will be available to 300 Alternatives members. The product features a maximum loan term of 36 months, a maximum loan amount of $3,000, and an eight percent APR, which will be fixed across all borrowers' profiles and credit scores. Alternatives and IPA seek to better assess the financial viability of the product and others similar to it, while also analyzing the data to better structure a loan that can motivate consumer demand and positive payment behavior.

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Overview
Summary

Commitment

Improving the Underwriting of Small Dollar Credit

Launched

2014

Est. Duration

1 year

Estimated Total Value

$188,929

Region

Northern America

Countries

United States

Commitment by

Alternatives Federal Credit Union

Partner(s) of the Commitment Maker(s)

Innovations for Poverty Action