Payday loans are short-term loans, usually offered with high interest rates, that are meant to cover a borrower’s expenses until their next paycheck arrives. This article will look at the number of people in the United States who use payday loans, the demographics of those users, their reasons for taking out payday loans, the financial pitfalls of doing so, and some alternatives to payday loans.
General Statistics
According to a study conducted by the Consumer Financial Protection Bureau, about 12 million American adults used payday loans in 2017. This is a decrease from recent years, but still suggests that payday loans are still a popular form of short-term lending. The same report found that the majority of payday loan users are between the ages of 25 and 44, and have an annual income of less than $40,000.
Reasons for Using Payday Loans
Many people use payday loans to cover financial struggles such as unpaid bills, debt, or other expenses. Others take out a payday loan to cover unexpected expenses, such as car repairs or medical bills. Some also use payday loans in emergency situations, when they need money quickly and have no other options.
Payday Loan Companies
Some of the most popular payday loan companies in the United States include ACE Cash Express, Check Into Cash, and LendUp. These companies offer payday loans with the convenience of online applications and quick approval times. However, they also come with high interest rates and short repayment terms, so borrowers should be aware of the potential financial pitfalls.
Financial Pitfalls
One of the major drawbacks of payday loans is the high interest rates associated with them. Borrowers should be aware that these loans are short-term, meaning that they must be paid back in full, plus interest, within a few weeks. If a borrower is unable to pay back the loan, they may face serious financial consequences, including damage to their credit score, additional fees, and even legal action.
Alternatives to Payday Loans
Before resorting to a payday loan, it is important to consider other options. One of the best ways to avoid the need for payday loans is to budget carefully and save money for unexpected expenses. Credit unions often offer low-interest loans to their members, which can be used to cover short-term financial needs. Additionally, building up an emergency savings fund can help borrowers avoid the need for payday loans in the future.
Limitations of the Study
This article is limited by the availability of data on payday loan use. Survey data on the specific reasons for taking out a payday loan is limited, and the data used in this article is from 2017 and may not reflect current trends.
Conclusion
Payday loans are a popular form of short-term lending, with about 12 million American adults using them in 2017. While payday loans can be a good solution for those facing financial struggles or unexpected expenses, they come with high interest rates and short repayment terms. Before taking out a payday loan, borrowers should consider other options, such as budgeting and saving, or using a credit union.
References
Consumer Financial Protection Bureau. (2017). Payday Loans: Data Analysis. Retrieved from https://files.consumerfinance.gov/f/documents/cfpb_payday-loan-data-point-2017.pdf
Other Frequently asked questions
What percentage of americans use payday loans?
6 percent
How many americans use payday loans every year?
12 million Americans use payday loans each year.
Every year, a total of $9 billion is spent on payday loan fees. Payday lending, provides Americans with a cash advance on their paychecks.
How big is the us payday loan industry?
Check Cashing & Payday Loan Services in the US – Market Size 2005-2028
| $17.6bn | Check Cashing & Payday Loan Services in the US Market Size in 2023 |
|---|---|
| 0.6% | Check Cashing & Payday Loan Services in the US Market Size Growth in 2023 |
| -0.3% | Check Cashing & Payday Loan Services in the US Annualized Market Size Growth 2018-2023 |
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What percentage of people default on payday loans?
The average payday loan default rate is about 6%, the same as the typical credit card default rate. While many payday loan users cannot repay their loans on time, there are various means for lenders to recover the money.
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