I’ll admit I don’t know much about PayDay loans, I just avoid them like the plague. So when a commenter posted a very interesting 4-part series from the Motley Fool about the merits of payday loans in my previous post, it made me think: who is actually getting these loans? If I were to guess, it would be someone making barely over the poverty line and just trying to make ends meet. According to the Fool.com article, last year 5 million people got these type of loans, and paid $3.4 billion in interest and fees! 5 million people? So about 2% of the U.S. population got one? Yet the default rate is only 2%. Hmm…
Google Answers is a site where you post a question and how much you’re willing to pay to get it answered. The cool thing is that after it’s answered it’s posted online for all to see. One guy offered $200 for information about opening up his own payday advance/check cashing shop. The answers were very interesting –
According to an “industry leader”, here are the demographics of payday loan borrowers from a study done in 1999:
Average age ? 35.6 years
Average annual household income – $33,187
Average time in current residence ? 4.5 years
Rate of how ownership ? 32.8 %
All are employed or have a regular income.
All have an active checking account.
Not what you expected? Me either. Of course these may be fudged, but I can’t find any better demographics. But these numbers boggle my mind, and seem to closely resemble the average American. I must ask: Are these 5 million people stupid, just uneducated, or just don’t care? Are there really no better options? Or am I just being callous, I mean lots of people drop $200 bucks on another iPod they don’t need or drive gas-guzzling cars, right?
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I noticed to the left of your article on payday loans there are payday loan ads.
Stupid is one word you used. I use ignorant. And desperate.
I know a handful of people who have used these services. Believe me, no amount of common sense talking will deter them. They won’t stop until they are burned by it, and horribly burned at that. For the most part, I’d say the unifying descriptors for people who use pay day lending services are “desperate, ignorant, and have no savings.”
Desperate because a bill is dangerously overdue. Desperate because they usually misspent the money they previously had on something they did not need and now are faced with the electricity being turned off.
Ignorant because they don’t really understand the ramifications of the interest rates. Worse, they have no desire to learn. Worst of all, if presented with the data, they actively ignore it as opposed to passively ignore it.
Lastly, it’s obvious they have no savings because they wouldn’t be desperate if they had even $200 in a savings account. They would simply withdraw the money they needed and pay the bill.
The people I’ve known who used PD Lending have had incomes from $25K to $60K. Some had spouses or live-in significant others. Some owned their homes. Some drove new cars, some old cars. None had any money in savings accounts.
dont use them!!!!!!! they are a quick fix that erupts into financial disaster.they will give you four five and more loans at a time–knowing full well you will not be able to repay them. then they debit your checking account over and over knowing you have no money in it ,so as to build up countless overdraft fees at your bank for you to pay–just so they might connect with an automatic paycheck transfer before you get it
The Payday loan ads next to your column are interesting. By default Google adsense targets keywords and displays ads that match your content. But you can exclude subjects though…