Do Seniors Use Payday Loans?
Inside Subprime: Jan 28, 2019
By Lindsay Frankel
It’s common for senior citizens on a fixed and limited income to struggle financially. Retired seniors receive income either from an employer pension check or Supplemental Security Income. When an emergency arises, it can be difficult for elderly citizens to secure additional income to cover the expense. In fact, the unemployment rate for older adults is on the rise. And since one-third of senior households runs out of money or goes into debt each month, an unexpected cost can force seniors to borrow money. But for seniors with a fixed income who already struggle to make ends meet, debt from borrowing can pile up quickly. For this reason, seniors are more vulnerable to high-cost payday loans than other groups.
Only 4 percent of seniors between ages 60 and 64 have used a payday loan, and the percentage of adults using payday loans gets smaller with age, according to Pew Charitable Trusts. That’s compared to 9 percent of adults ages 25-29. But in recent years, some states have seen growth in the number of seniors using payday loans. In California, more seniors used payday loans in 2016 than any other age group, even as payday loan usage began to shrink in the state overall. And in Florida, the number of adults over 65 using payday loans nearly doubled over the course of a decade, even though the population of senior residents only rose 10 percent.
With APRs of almost 400 percent on average, payday loans are a risky choice for any borrower. But consumer advocates contend that payday lenders intentionally target vulnerable populations, including low-income seniors. Many seniors don’t know where to turn for financial help, making them easy prey for payday lenders.
While adults age 65 and older were found to be the group most likely to hold a bank account, that likelihood increased with income, according to the FDIC. Seniors earning less than $25,000 a year were less likely to have a checking or savings account than the general population. And even seniors who hold bank accounts may lack options when it comes to borrowing.
Alternatives for Seniors
Low-income elderly citizens should check their eligibility for state assistance programs, which can help defray the cost of living. In addition, many local nonprofit organizations are dedicated to helping seniors overcome financial hardship. Don Miller, the seniors program manager for HopeLink in Nevada, says payday loans are a common problem among the older adults seeking help from the organization. Of the 80-100 seniors he sees each week, at least half have turned to payday loans for emergency cash. “They don’t realize they might be paying on that for the next year or two,” Miller said. Payday loans trap vulnerable seniors in debt that can be impossible to overcome.