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Payday alternative loans: PAL or Foe?

Author

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  • Stone, Anna-Leigh

Abstract

Payday alternative loans (PALs) are small, short-term loans granted by federal credit unions. This paper examines the history of these loans, characteristics of credit unions that grant PALs, and how these loans impact credit risk. Credit unions with a low-income designation offer PALs and make a higher amount and number of PALs in terms of the loan portfolio. Credit unions that offer PALs have lower loan delinquency rates and do not have more one-year forward-looking credit risk. The findings contribute to the broader literature on payday loan alternatives and credit union risk taking.

Suggested Citation

  • Stone, Anna-Leigh, 2024. "Payday alternative loans: PAL or Foe?," Finance Research Letters, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:finlet:v:66:y:2024:i:c:s1544612324006962
    DOI: 10.1016/j.frl.2024.105666
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    References listed on IDEAS

    as
    1. Jessica N. Flagg & Simona Hannon, 2023. "An Overview of Personal Loans in the U.S," Finance and Economics Discussion Series 2023-057, Board of Governors of the Federal Reserve System (U.S.).
    2. Thomas A. Hemphill, 2020. "The small-dollar loan industry: a new era of regulatory reform—and emerging competition?," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 55(3), pages 150-160, July.
    3. Gomez-Biscarri, Javier & López-Espinosa, Germán & Mesa-Toro, Andrés, 2021. "The risk implications of the business loan activity in credit unions," Journal of Financial Stability, Elsevier, vol. 56(C).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Credit unions; Credit risk; Payday alternative loans;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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