5 important and alarming payday loan statistics
You have probably heard that payday loans can be dangerous sometimes. But you may not have noticed how bad they can be. This is why we have put together statistics, …
By Olivia Bennett
You have probably heard that payday loans can be dangerous sometimes. But you may not have noticed how bad they can be. This is why we have put together statistics, figures, and numbers to show you how destructive payday loans can be. Join us now for a magical journey through the dangerous world of payday debt.
APR
APR stands for Annual Percentage Rate and is a number that indicates how much a loan with fees and interest will cost in a year. This is important because it allows you to accurately compare different types of loans. Unlike most personal loans repaid over several years, payday loans only have a two-week repayment period, so they can be cheaper than longer-term loans. a long time, but this is only true if you are really able to pay the loan with commissions and interest.
A study by the Consumer Finance Protection Bureau (CFPB) found that the average payday loan has an annual percentage of almost 400%. And it’s a big problem.
2. Continue
Another CFPB study found that more than 80% of payday loans are transferred or borrowed. This means that most of these short term loans without credit check go beyond their two week repayment period. And the only reason someone would pay to extend a loan is that they can’t pay it off on time. And unfortunately, there is a good chance that two weeks later it will be difficult for you to repay this loan plus a higher fee if you cannot repay a loan in two weeks. As a result, payday loans are postponed over and over again, leaving borrowers caught in a cycle of debt from which they cannot escape. In our last blog post, you will find all the awful details on the debt cycle for payday loans.
3. Anger over the debt
Regarding the debt cycle, this first study by the CFPB showed that the average payday borrower receives 10 loans per year and spends 199 debts out of 365 (or 366 if it is a leap year). In other words, they are most often in debt. Sure, there are “good” types of debt, such as a well-maintained credit card, that can help build your loan, but payday loans aren’t that type of debt.
Unlike legitimate credit card providers who report your payments to the credit bureaus, payday lenders generally do not report your payments. Unless you miss payments, of course. Then your account will be transferred to the collections and the collections will definitively report your non-payment. Even at best, these bad credit thefts will not help you. And in the worst case, you can really ruin everything.
4th day after day
But payday lenders surely lend mainly to irresponsible people, right? No way! It’s good to imagine that anyone who is cheated deserves it, but it rarely is (and deciding who “deserves” to be cheated doesn’t seem like a good idea anyway). A Pew study found that 69% of payday borrowers use their loans to pay for recurring daily expenses such as rent and utility bills.
Considering all the other terrifying statistics on payday loans, it is clear that this is not a sustainable lifestyle. Unfortunately, borrowers often have no choice. (If you have a car, you can search for credits for the title, but it’s still a very bad option.
The remaining 31% of payday loan users who use their one-off loans for unexpected expenses are also likely to meet needs such as auto repairs or medical expenses. There are many people who cannot use other options.
5. 14%
Ready for one last terrible condition? A later study by Pew found that only 14% of payday borrowers can pay back their loans. It is not a high percentage. Because of this, many payday loan customers are forced to extend their loans or pay them off tomorrow. Considering all the other statistics that we have shared before, many people have a bleak picture.