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Did you know that approximately 12 million Americans rely on payday loans each year? Over the past five years, about 6 percent of adults in the US have turned to payday lending, and this trend is expected to continue growing. Surprisingly, a staggering amount of $9 billion is spent on payday loan fees annually.
Payday lending serves as a convenient way for Americans to access a cash advance on their paychecks. It’s no wonder payday loans have gained immense popularity in the last decade. In fact, as of 2020, there are approximately 23,000 payday lenders scattered across the United States.
However, have you ever wondered why so many Americans are resorting to payday loans? Moreover, what repercussions does this widespread usage have? Join Pachyy in exploring these crucial questions.
Payday Loan Statistics
Did you know that millions of Americans rely on payday loans each year? According to Credit Summit, around 12 million Americans use payday loans annually. That’s quite a significant number!
In 2017, there were over 14,300 payday loan storefronts across the United States. It’s safe to say that payday loans have become quite prevalent in our society.
The average size of a payday loan is $375, and the typical borrowers for this kind of loan earn about $30,000 per year. It’s important to consider these figures before deciding to take out a payday loan.
Surprisingly, around 58% of payday loan borrowers find it challenging to meet their monthly expenses. Only a small 14% of borrowers can actually afford to repay the loan.
These statistics highlight the importance of being able to afford the loans you take out. It’s crucial to think twice before borrowing money if you’re unsure about repayment.
If you fail to keep up with repayments on your payday loan, there can be negative consequences. These may include the following:
- Late fees
- Damage to your credit rating
- Difficulties accessing future finance and loans
- Borrowing becoming more expensive in the future
Before deciding to take out a payday loan, it’s essential to understand the potential consequences of not repaying it. Learn more about what can happen if you don’t meet your payday loan repayments here.
What Percentage of Payday Loans Are Used by Borrowers Multiple Times?
Did you know that around 75% of payday loan borrowers have actually used this type of borrowing in the past? It’s quite surprising to learn that a whopping 80% of payday loans are taken out just weeks after borrowers have paid off a previous payday loan. In fact, 7 out of 10 payday loan users rely on these loans for recurring expenses like rent and bills.
However, it’s important to remember that payday loans in the USA are not meant for long-term or regular use. They should only be used for one-time emergencies, such as unexpected car repairs that can’t wait until your next payday.
Before applying for any loan, it’s crucial to determine if it’s the right fit for your financial situation. If you’re experiencing long-term financial difficulties, seeking appropriate assistance is highly recommended.
Why Are Many Americans Choosing Payday Loans?
A large number of Americans are turning to payday loans, but it’s important to understand how to use them wisely. Many borrowers are either not taking the necessary precautions or are borrowing for the wrong reasons – and sometimes both.
Importance of Taking Necessary Precautions
Given the high prevalence of payday loans in the US, it is clear that many users are not taking the necessary precautions. It’s crucial to consider this type of loan only if you have a stable income that will allow you to repay it. Unfortunately, more than half of payday loan borrowers struggle to meet their monthly expenses. If you are not financially stable, a payday loan may not be the best solution for your situation. Statistics reveal that only 14% of borrowers are actually able to repay their payday loans.
Borrowing for the Right Reasons
Payday loans can be expensive, so they should be used for one-time emergencies. However, millions of Americans are not using payday loans as intended – for temporary and unforeseen expenses. Examples of suitable situations for a payday loan include emergency car repairs, hospital or veterinary bills. Unfortunately, 70% of payday loan borrowers are utilizing them for regular recurring expenses like rent and utility bills instead of genuine emergencies. Some borrowers also mistakenly use payday loans to repay other loans, which is never recommended.
What Are the Consequences?
The consequences of a significant number of Americans relying on payday loans are far-reaching. The high fees associated with these loans often result in temporary relief from financial worries, only to be followed by ongoing money difficulties. A major impact of taking out a payday loan is the potential to fall into a cycle of debt. It’s worth noting that three-fourths of individuals who apply for payday loans have previously utilized them. Furthermore, a staggering 80% of payday loans taken out by Americans are obtained within just two weeks of repaying a previous one.
If you are uncertain about whether to consider a payday loan, we recommend referring to our informative resource, “Is A Payday Loan Right For Me?