How Many People Have a Payday Loan In the US?
The number of US citizens using payday loans each year has grown to 12 million. Since 2017, 6 percent of the adult population have taken out a payday loan. Every year in the US, borrowers spend almost $9 billion in payday loan fees.
These statistics reveal that millions of Americans, from Texas to Maine, are turning to payday lending each year, and this trend shows no signs of slowing down, with 23,000 payday lenders operating across the nation.
This article by Ready Payday Loans will explore the current situation of payday lending across the US and help explain why so many individuals resort to this form of short-term borrowing.
How Do Payday Loans Work In The US?
Payday loans in the US work as short-term, high-interest loans typically due on the borrower’s next payday. Borrowers typically authorize electronic withdrawals by their lender to repay the loan, along with fees and interest.
The average amount for a payday loan in the US is $375 per loan, and the average annual salary for a borrower of this loan type is $30,000.
Despite providing quick access to funds, payday loans often come with very high interest rates, leading many borrowers into cycles of debt. Over half of payday loan borrowers are unable to meet their expenses each month.
If you are unable to meet your repayments for a payday loan, you could face late fees and suffer damage to your credit score. You could therefore find it difficult to take out future loans.
What Are The Reasons For Needing a Payday Loan?
Borrowers often turn to payday loans to cover unexpected expenses such as medical emergencies or car repairs when they lack savings. Some borrowers use payday loans to bridge gaps between paychecks, especially if they encounter unexpected bills or temporary financial setbacks and need emergency cash.
Individuals with poor credit may resort to payday loans when traditional lending options are unavailable, seeking quick access to funds for urgent needs.
Why Do So Many People Need A Payday Loan In The US?
Firstly, a significant portion of borrowers fail to take necessary precautions before opting for a payday loan. Many find themselves unable to meet monthly expenses, yet still pursue payday loans as a temporary fix; statistics show that only 14% of borrowers can actually afford to pay back their payday loans.
Secondly, a misconception persists regarding the appropriate use of payday loans. They’re often misused for everyday expenses or to repay existing debts, which is not recommended. It is reported 70% of borrowers resort to payday loans for recurring expenses such as rent and utilities, rather than unforeseen emergencies as intended.
Do Many People Take Out A Repeat Loan?
One of the most striking statistics is how many Americans need to take out a repeat loan. A staggering 75% of payday loan users have relied on this type of loan in the past, with 80% securing a new loan within weeks of repaying a previous one.
Payday loans are not designed for recurring use, therefore if you are considering taking out a payday loan you should make sure you are borrowing for the right reason.
What Are The Consequences Of Using a Payday Loan?
The consequences of widespread payday loan usage are multifaceted. While these loans may help provide immediate relief, they often create a cycle of debt due to their high fees and short repayment periods.
As noted, three-quarters of payday loans are obtained by individuals with a history of prior borrowing, indicating a cycle that’s difficult to break. The reliance on payday loans can therefore hinder your long-term financial stability, leading to further economic strain.
High Cost of Payday Loans
While payday loans may offer temporary solutions, they often come at a high cost for many Americans, both financially and emotionally.
You should take serious consideration as to whether a payday loan is the best form of borrowing for your financial situation, and make sure to explore alternative forms of borrowing that could prevent you from falling into further financial difficulty.
