Payday Loans: Who Uses Them and Why? | Pew


this is Jennifer she had trouble paying her rent and
chose to take out a payday loan of three hundred seventy five dollars to make
ends meet but it ended up costing her more than five
hundred dollars in fees to do it to cover her missing rent, Jennifer
had a number of options she could’ve asked her friends and
family for money but she felt embarrassed her credit cards were maxed
out and she didn’t want to sell stuff or cut back even further on expenses So Jennifer decided to take out a
short-term loan because it seemed like a responsible choice she’s not the only one twelve million americans use payday
loans every year who are they? they come from all walks of life after all all you need is income and a checking
account to qualify like Jennifer most payday loan customers
borrow to cover routine living expenses like utilities, car payments, food, and rent,
carrying the loan for months but these loans are advertised is
emergency short-term relief why the disconnect? payday loans are also described as a way
to avoid overdraft charges the reality is that over half of loan
customers end up overdrafting anyway and a quarter actually cite the loan as
the reason for an overdraft. Jennifer can’t afford to repay the loan and keeps
renewing it ending up in debt for five months of the
year even though the loan was advertised as lasting only two weeks this is typical and many borrowers forty
one percent have to use a cash infusion like a tax refund or help from family and
friends to finally pay their loans back when all is said and done she spent more
on fees then she received in credit and she still owed the original three
seventy five eventually she had to sell some
of her stuff and borrow from her parents which is what she thought she was
avoiding in the first place to learn more about payday loans who
uses them and what borrowers think about them check out pew trust dot org slash small loans

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