Data Detail Payday Loan Costs
State regulatory data show that low-income borrowers who use payday loans take out an average of eight payday loans a year, which costs them about $520 annually in interest on those loans that average $375 each, according to a study released Wednesday by the Pew Charitable Trusts.
The Pew report also found that while most payday borrowers are white women between 25 and 44 years old, five groups have higher odds of using payday loans: people without a four-year college degree, renters, African-Americans, people earning less than $40,000 a year and people who are either separated or divorced. Although a higher percentage of the African-American population uses payday loans, the overall number of white women using them is higher.
"A major concern about payday loans is that the packaging does not match the experience," said Nick Bourke, a project manager at Pew Charitable Trusts in Washington, D.C. "The loans are advertised as short-term, yet the average borrower is in debt for five months.
"Also, they advertise these loans as being important for emergencies, but the vast majority of borrowers return to these loans for basic living expenses such as rent, utilities, credit card bills and food. The gap between the packaging of these loans and their actual usage is wide and concerning."
In the report, "Payday Lending in America: Who Borrows, Where They Borrow, and Why?" Pew researchers found Pennsylvania has some of the toughest laws governing the industry in the nation. A new bill working its way through the Legislature, however, would allow storefront payday lenders to again set up shops in the state, increasing the likelihood of more residents using such loans.
Read the full article at post-gazette.com
- Safe Small-Dollar Loans Research Project