The Truth About Payday Loans

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.

Who Uses Payday Loans?

12 million adults use payday loans every year.

The Typical Borrower

Others Commonly Affected

  • Those without a 4-year college degree
  • Those who rent rather than own
  • Minorities
  • Those with annual incomes below $40,000
  • Those who are separated or divorced

Why Do People Use Payday Loans?

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."

— Female borrower, Chicago

"I got mine because my son got in a car accident."

— Male borrower, New York

Where Borrowers Borrow

75% of loans are from a storefront.

25% of loans are conducted online.
Loan fee is 73% more online.

How Payday Loans Work

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.

Stress and the Debt Trap

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

On Every Street Corner

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.

Usage by Demographic

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.

Renters Vs Homeowners

10% of renters have used a payday loan.


11% of those earning $15,000 up to $25,000 have used a payday loan.

Parental Status

8% of parents have used a payday loan


High school grads are 1% less financially challenged than people with some college education

You Can Be the Hero

Financial Stress Leads To:

  • Loss of Sleep
  • Absenteeism
  • lower productivity
  • Turnover
  • Workplace violence

Luckily, for others there is an alternative.

Learn how to be the hero at