Payday lending has existed in some form for over 100 years, but in its current incarnation it’s been around since the early 1990s.
A recent Pew Charitable Trust report on Payday Lending in America provides some eye-opening information regarding borrowers and lenders.
12 million adults use payday loans every year.
The Typical Borrower
Most borrowers use payday loans to cover ordinary living expenses over the course of months, not unexpected emergencies over the course of weeks.
"I was behind on my mortgage and cable bill."
"I got mine because my son got in a car accident."
75% of loans are from a storefront.
25% of loans are conducted online.
Loan fee is 73% more online.
Borrowers take out small-dollar, short-term, unsecured loans for a flat fee.
The borrower gives the lender a personal check or debit authorization for the amount of the loan plus the finance charge.
The lender agrees to hold the check until the borrower’s next payday.
Problems begin when a borrower can’t pay off the original loan on time and is forced to take out another loan to pay off the first thereby incurring another finance charge and creating a cycle of debt that is difficult to escape. This cycle causes not only financial stress but also emotional stress for the borrower.
Borrowers Pay $4.2 Billion Annually in Fees
The average borrower takes out a loan of $375
8 times per year
The average loan fee is more than $50
The average borrower pays $520 in interest an outstanding loan for 5 months of the year
The payday loan industry operates in 35 states.
Allow single-repayment loans with APRs of 391% or higher.
Have payday loan storefronts but maintain more exacting requirements such as lower limits on fees or loan usage, or longer repayment periods.
Generally have no payday loan storefronts but still have title loans, pawn shops and other alternative loan options.
* Includes the District of Columbia.
There are more payday loan locations in America than McDonald’s.
Certain demographic groups are more likely than others to have used a payday loan in the past five years.
5.5% of all adult Americans have used a payday loan.
9% of adults ages 25-29 have used a payday loan.
10% of renters have used a payday loan.
11% of those earning $15,000 up to $25,000 have used a payday loan.
8% of parents have used a payday loan
High school grads are 1% less financially challenged than people with some college education
Luckily, for others there is an alternative.
Learn how to be the hero at www.flexwage.com