- 12 million Americans use payday loans each year.
- The average loan size of a payday loan is $375.
- On average, payday lenders pay $520 in fees to borrow $375.
Key Payday Loans Statistics
As of 2017, there were 14,348 payday loan storefronts in the United States (by comparison, there were only 14,027 McDonalds locations).
7 in 10 of those who take out payday loans use them for regular recurring expenses such as utility bills and rent payments.
The average income of payday loan borrowers is $30,000 annually, but the typical payday borrower is in debt five months out of the year. Every year, $9 billion is paid in payday loan fees.
12 million Americans use payday loans each year. In the past five years, about 6 percent of adults in the US have used payday lending, and this will likely continue to increase.
Payday lending, provides Americans with a cash advance on their paychecks. Payday loans have been increasing in popularity over the last decade and, as of 2020, there are around 23,000 payday lenders (including the aforementioned 14,348 payday loan storefronts) in the United States.
Payday Loan Repayment
80% of payday loans are taken out within 2 weeks of paying off a previous payday loan, and 75% of payday loans are taken out by someone who has used them before. 58% of payday loan borrowers have trouble meeting monthly expenses and only 14% of borrowers can actually afford to pay back their loans. Part of the reason for this is that the average annual percentage interest rate (APR) for payday loans is 396%.
Payday loans are used by all generations, but predominantly Millennials and Gen-Xers. Millennials’ use of payday loans has led to a rise in online payday loans and cash advance apps. 1 in 4 payday loans are rolled over / re-borrowed 9 times or more.
These statistics reveal how important it is to only borrow loans when you can afford them. While you won’t go to prison for not paying back a payday loan you are still likely to receive penalties for these, including the following:
- Late fees.
- Damage to your credit rating.
- Issues accessing future finance and loans.
- Borrowing may be more expensive in the future.
By taking out too many payday loans at once, this could make it hard to repay out of your pay cheque each month. Payday loans become dangerous when there are late fees involves and added interest – and this is when the cost of a loan really starts to add up.
Not to mention that missing repayment can negatively impact your credit score, making it harder to access similar loans and other forms of credit in the future – and even some essential things like a cell phone, being able to rent an apartment or get a mortgage.
Therefore, according to the regulation of each state, it is typically just one loan that you are allowed (such as Florida, Ohio, California) and some will allow two open (such as Illinois) and some have unlimited ( such as Texas and Nevada)
Remember, before taking out a payday loan, you should limit yourself to maximum one or two payday loans outstanding or open at any time. This is because payday loans are expensive, and getting too many can be dangerous – hence it is a state law or enforced by regulation.
If you need to borrow more money, consider alternatives such as paying off debt, using a credit union, selling your other personal items or budgeting more carefully.
Could you do your grocery shopping more effectively? Could you and your partner share a car for a couple of months? Is it worth asking for some relatives for some hand-me-downs for your kids in toys or clothes? There are a number of simple ways to save money around the house and avoid using high cost loans instead.