Who Uses Payday Loans the Most?

By Jessica Easto

A staggering 5.5 percent of all adults in the United States have used a payday loan in the last five years. In 2010, that added up to 12 million Americans. Payday loans, also called “cash advance loans,” are advertised as offering borrowers small amounts of money for short amounts of time—with very big interest rates. (If you’re interested to learn more about cash advances in particular, check out the OppU article What is a Cash Advance?) They are generally used when people need cash quick, and studies have shown that the majority of payday borrowers do not use the funds for unexpected emergencies, as one might think, but for recurring expenses such as rent, groceries, and utilities.

Because of their high interest rates and strict terms, it can be difficult for borrowers to repay their payday loans, trapping them in a cycle of debt that is difficult to break and making that “short-term” loan more long term than expected.

According to a 2012 study by PEW Trusts, most payday borrowers—strictly by the numbers—are white (55 percent) women (52 percent) between the ages of 25 and 44 (52 percent). However, those figures don’t necessarily paint an accurate portrait of a typical payday borrower. When researchers controlled for other characteristics, they found five groups most at risk for using payday loans:

  • Those with little higher education. A full 85 percent of payday borrowers did not have a four-year college degree. People in this group are 82 percent more likely use payday loans than their college-educated counterparts.
  • Renters. Fifty-eight percent of those who use payday loans rent their homes—that’s 10 percent of all renters.
  • Separated and divorced individuals. People from broken marriages are 103 percent more likely to borrow payday loans than those of other marital statuses.
  • Those with lower incomes. Households earning less than $40,000 a year make up 72 percent of payday borrowers, making them 62 percent more likely to have a payday loan than households making more.

It’s easy to assume that lower income individuals are the most likely to fall prey to payday lending. And while income is clearly a factor, it’s not the most important factor. For example, low-income homeowners are less likely than high-income renters to use payday loans—a full 8 percent of renters making between $40,000 and $100,000 a year have used payday loans!

The main takeaway here is that anyone can be the victim of predatory lending and payday loans. Its snare reaches across all demographics, regardless of gender, race, socioeconomic status, or education.


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