DYK (Did You Know?): Payday Loans
Payday loans have become a way for some people to get quick cash when they need it, but it can come with high costs and quickly recreate a “quicksand” effect where borrowers take out additional loans to cover outstanding outstanding loans. OSalvation demand for small dollar loans fell 67percent during COVID-19 confinementthe trade group Alliance of online lenders believes recoverthere to pre-Covid levels may not come for some time. Here are some facts about payday loans:
– 12 million Americans use payday loans each year.
– In 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 a year and the average payday borrower’s income is $30,000 a year.
– 7 in 10 people who take out payday loans use them for regular recurring expenses such as utility bills and rent payments and average $375.
– Each year, $9 billion is paid in payday loan fees, with only 14% of borrowers able to repay their loans.
– The average annual percentage interest rate (APR) for payday loans is 396%.
– Payday loans are used by all generations, but mainly by millennials and generation X. Use of payday loans by millennials (To earnDave and Carillon) led to an increase in online payday loans and cash advance apps.
– Seventeen states and the District of Columbia have banned payday loans or set interest rate caps.
– Many payday loans have maturities of only a few weeks and carry an amazing annual interest rate of up to 300 percent.
– The Consumer Financial Protection Bureau report indicates that more than 80 percent payday loans are converted into new loans before being fully repaid.
– Monthly borrowers are disproportionately likely to stay in debt for 11 months or more.
– Total outstanding personal debt in the United States is $143 billion.
– There are 21.1 million outstanding personal loans in the United States
– The Aaverage personal loan interest rates vary between 10 percent and 28 percent.
– According to data compiled by TransUnion, the answer is Gen X’erswhich recorded an average loan balance of $9,522.
– On average, payday loan users spend $520 in fees to borrow $375.