Payday loans are often looked down upon and more often associated to be for those with lower incomes or for those struggling to find money at the end of the month. This is the society’s assumption, however, that couldn’t be further from the truth! Payday loans are being used increasingly by high income earners for their situation, money for an emergency or a special occasion.
According to a report conducted by Pew Charitable Trusts, nearly 6% of adults in United States have used some form of a payday loan within the last five year. (Source: NY Times)
The percentage works out to nearly 21 million American citizens using payday loans or equivalent to roughly 60% of the whole Canadian population. Most of the payday loans are used to cover everyday expenses, not emergencies.
The interesting statistic that stands out is that one out of every fourteen payday loan applicants are professionals in well-paid jobs such as doctors, lawyers and accountants, a study that was conducted has shown. (Source: The Sun)
Even though payday borrowing is mostly concentrated among younger, lower-to-moderate income individuals, people with different ages, high-to-lower incomes use payday loans. Among the borrowers most likely to use them are those who are renters, rather than homeowners; those earning less than $40,000 annually; or those who are separated or divorced. Furthermore, nearly half of the people utilizing the services of payday loans are white collar workers, in management, sales and marketing positions amongst others. Therefore we can conclude that race, age, career orientation or income don’t necessarily indicate that payday loans are mostly used by low income earners.
Majority of the loans taken through payday loan lenders are secured by a postdated check, or an electronic debit authorization. Three-fourths of payday borrowers use storefront lenders, and about a quarter take out payday loans online.