The Charlotte Post: Survey Reveals Payday Loan Demographics
A national study on the $7.4 billion payday lending industry could provide a glimpse at the implications for North Carolina consumers should a bill become law.
The Pew Charitable Trusts report “Payday Lending in America: How Borrowers Choose and Repay Payday Loans” details the demographics of 12 million Americans who use a payday loan. The survey found consumers trying to avoid long-term debt, borrowing from family or friends, overdraft fees, and cutting back on expenses. But with the average loan requiring a repayment of more than $400 in two weeks, the average borrower struggles to meet that standard. When they can’t repay on time, they resort to the options they originally tried to avoid.
“Payday loans are marketed as an appealing short-term option, but that does not reflect reality,” said Nick Bourke, Pew’s expert on small-dollar loans. “Paying them off in just two weeks is unaffordable for most borrowers, who become indebted long-term. The loans initially provide relief, but they become a hardship. By a three-to-one margin, borrowers want more regulation of these products.”
Pew’s survey found 5.5 percent of adults nationwide have used a payday loan in the past five years, with three-quarters of borrowers using storefront lenders and almost one-quarter going online. State regulatory data show that borrowers take out eight payday loans a year, spending about $520 on interest with an average loan of $375. Overall, 12 million Americans took out a payday loan in 2010, the most recent year for which substantial data are available.