Undermining Economic Security
Use of Alternative Financial Services in Virginia

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The protracted economic recession and rising costs of health care, food, and gas, have reduced household income while increasing costs. Prior research found

• A quarter of Virginia households are income inadequate, meaning they do not earn enough to meet their regular monthly expenses.
• Nearly thirty percent of Virginia households are asset inadequate; they do not have sufficient assets to weather a short-term financial crisis.

This paper focuses on alternative financial services (AFS) that provide short-term, small-dollar loans a household might use to make ends meet during a temporary income shortfall. Compared to loans from mainstream financial institutions such as banks and credit unions, loans from AFS providers have

• Smaller loan values.
• Shorter loan terms.
• Substantially higher interest rates and fees.

Reliance on alternative financial products to make ends meet is a symptom of income and asset inadequacy. Use of these products may exacerbate a household’s already challenging financial situation, undermining their current economic security and future well-being.