Consumers Combining Payday, Traditional Loans in Risk to Lenders

Cash-strapped consumers are frequently tapping both payday lenders and traditional installment loan providers to get the money they need, which may make it harder for lenders to estimate their customers’ credit risk, according to a new study by TransUnion.

The findings call into question the notion that many customers turn to high-interest, small-dollar loans like payday or car-title loans only as a last resort when they’re shut out of traditional credit markets. TransUnion found that subprime borrowers may access credit from multiple types of lenders simultaneously because they can’t get enough cash from a single source alone.

Lending to ...