We’re excited to announce our new Small Dollar Loan Score. This new score offers a risk assessment of a user’s ability to repay a small dollar loan.
About the Score
The Small Dollar Loan Score evaluates the probability of a user making their first four small dollar loan payments. It provides a series of four probability scores, one for each of the initial four installments.
Small dollar loans, typically capped at $5,000, are unsecured, short-term installment loans. Repayments are structured in installments for up to two years. They provide quick financial relief to borrowers who may not have access to other sources of credit (e.g., high credit card limits or larger and longer term personal loans).
The Small Dollar Loan Score is a predictive machine-learning model that leverages Cashflow Attributes calculated from the user’s real-time transaction history and balance data, updated with each new data upload.
The Small Dollar Loan Score is trained on an expansive dataset of loan delinquencies and defaults and hundreds of Attributes such as overdraft fees, changes in income, balance trends, and more.
How it Works
- Building the dataset: Using a matching algorithm, Pave identifies each installment payment and its corresponding loan, building the user’s detailed repayment history for small dollar loans across multiple lenders.
- Feedback from lenders: Our customers share their underwriting and loan tape data with us which helps improve the accuracy of our models, leading to better predictions and risk assessments.
- Score generation: Based on the labeled repayment data, the Small Dollar Loan Score provides a probability for each of the first four installment payments.
Use Cases
The Small Dollar Loan Score is used to:
- Reduce defaults and late payments
- Increase approval rates by offering competitive loan amounts and APRs
- Tailor loan terms with personalized installment plans
- Refinance loans to offer higher credit limits or longer payment plans
Read more about Small Dollar Loan Score use cases here.
Why this Matters
By implementing Pave’s Small Dollar Loan Score, lenders can drive improvements across the lending experience. This ensures lenders can safely extend credit, manage risks, and support financial health.
- User Experience: Offer terms that fit a user’s financial situation. Borrowers can receive a tailored loan amount and installment plan based on their Small Dollar Loan score.
- Risk Management: Adjust offers based on predicted repayment behaviors with insight into the probability of timely repayments across the first four installments.
- Customer Retention and Growth: Improve customer loyalty and attract new customers by offering competitive and personalized loan terms.
- Real-time Scoring: Dynamically adjust terms to users’ financial situation (for example, when there are sudden financial shocks) by using Small Dollar Loan Scores built on users’ real-time bank transactions and balances.
Book a demo to see how the Small Dollar Loan Score can be applied to optimize your risk decisions.
Here are some FAQs to get you started
I understand that the probabilities decrease from the 1st to the 4th payment. Is this always the case?
This won’t always be the case. There are 4 separate models trained to predict the first 4 installments. This means in some cases, a user may end up with higher probabilities for later payments. However, we’ll analyze this and put in place mitigating factors. For example, passing the probabilities of payments for the previous installments to the model.
What happens if I rescore the same person’s loan application after several installments? They might have missed a payment or two, or they might not have. Do you account for these changes?
The user’s scores may change with new transactions and missed/paid installments. For example, if a user missed a payment, became unemployed, has seen soaring debts or other expenses vs their income, etc., they’ll likely have lower scores.
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