Alternative financial services in the United States

The consumer finance industry (meaning branch-based subprime lenders) mainly came to fruition in the middle of the twentieth century.

There were many reasons why certain people would: Besides charging a higher interest rate to compensate for their risk, consumer finance companies are usually able to operate successfully because their employees are given more flexibility than banks in structuring loans and in collections.

Americans that use non-traditional lenders to meet short-term financial needs include almost ten million households that are unbanked or underbanked, according to a 2004 study prepared for The Fannie Mae Foundation by the Urban Institute Metropolitan Housing and Communities Policy Center, "Alternative Financial Service Providers."

Many borrowers who take advantage of such subprime lending options tend to have low credit scores or limited credit backgrounds, and a vast majority of those who utilize alternative loans online like payday loans tend earn an annual income of $40,000 or less.

This is because the sub prime lenders in poorer communities will often be the only local store, yet will be higher priced.