Payday loans have become a way for some people to secure cash when they need it fast, but it can come with a heavy cost and quickly recreate a “quicksand” effect where borrowers take out additional loans to cover overdue current loans. While demand for small-dollar loans fell 67percent during the COVID-19 lockdown, the trade group Online Lenders Alliance believes recovery to pre-Covid levels may not come for some time. Here are a few facts about payday loans:
– 12 million Americans use payday loans each year.
– As of 2017, there were 14,348 payday loan storefronts in the United States (there were only 14,027 McDonalds locations).
– The typical payday borrower is in debt five months out of the year and the average income of payday loan borrowers is $30,000 annually.
– 7 in 10 of those who take out payday loans use them for regular recurring expenses such as utility bills and rent payments and averages $375.
– Every year, $9 billion is paid in payday loan fees, with only 14 percent of borrowers able to afford repayment of their loans.
– The average annual percentage interest rate (APR) for payday loans is 396 percent.
– Payday loans are used by all generations, but predominantly Millennials and Gen-Xers. Millennials’ use of payday loans (Earnin, Dave, and Chime) has led to a rise in online payday loans and cash advance apps.
– Seventeen states and the District of Columbia have banned payday lending or set interest rate caps.
– Many payday loans have maturities of just a few weeks and carry an astonishing annual interest rate up to 300 percent.
– The Consumer Financial Protection Bureau report states that more than 80 percent of payday loans are converted into new loans before they are fully repaid.
– Monthly borrowers are disproportionately likely to stay in debt for 11 months or longer.
– Total outstanding personal loan debt in the United States is $143 billion.
– There are 21.1 million outstanding personal loans in the U.S.
– The average interest rates for personal loans vary between 10 percent and 28 percent.
– According to data compiled by TransUnion, the answer is Gen X’ers, who recorded an average loan balance of $9,522.
– On average, payday loan users spend $520 in fees to borrow $375.