Who Uses Payday Loans – A Canadian Perspective (Manitoba)

Analyze This!

In our previous study, we analyzed current demographic data for users of PersonalMoneyStore.com, an online portal where users can be matched with lenders who supply payday loans for consumers who are experiencing short-term financial difficulties.

The collected data refutes prevalent media claims that the payday loan are instruments of economic exploitation. Specifically, it counters the claims that they are exploitative of the poor, uneducated or similar groups. With the following study, let’s extend this example into Canada, where studies have produced quite similar findings.

The Payday Loan Association (CPLA) takes 350 customers from the province of Manitoba as a representative sample. Canada’s leading public opinion survey company, Pollara, conducted the survey. In addition to pointing out who is using the loans in Manitoba, specific attitudes about no fax payday loans and other credit options are also measured.

Who Uses Payday Loans in Canada?

On average, the Canadian faxless payday loan customer is:

• 38 years old
• 77% are employed full time
• Nearly half (46 percent) have completed post-secondary education
• 39% reported income of $50,000 or more
• Overall household income on par or ahead of general population
• 39% of customers reported household income in the $50,000 or more

Regarding the survey findings, CPLA President Stan Keyes stated:

Payday loan customers are everyday Manitobans. It is clear that they know what they’re doing, know what they’re paying and have good reasons for choosing a payday loan over other available credit options.

Manitoban Personal Credit Profile

Contrary to the popular belief that people use faxless payday loans because they have no other option, the surveys demonstrate that customers have access to a wide variety of credit products, yet they still choose short-term consumer credit products:

• Customers owe an average of $24,357 to various financial institutions, excluding mortgages
• Customers have access to a variety of credit options, but choose payday loans over a line of credit, credit card, retail card, overdraft or other forms of credit
• Reasons given are convenience, ease of use and long hours of operation for lenders
• Only 15% of customers who used payday loans stated they had “no other option”

Borrowing Habits

• Customers average only $300.05 when they borrow
• Customers expect to pay an average of $24.67 for a $100 two-week loan
• 79% have paid back their payday loans on time
• 18% have paid back “most” on time

Educated and Informed Consumers

• Customers clearly understand the costs and terms of their payday loan
• They understand this as they do fees and terms on mortgages, credit cards and bank fees
• Customers described themselves as “average, working Canadians”
• Customers indicated they make an “informed choice” when they take out a payday loan

Payday Lenders vs. Banks and Credit Unions

• Customers preferred payday loan companies for overall convenience and ability to access small-sum loans
• Banks and credit unions only offer loans for more than the customer wants or needs
• Customers rate no fax payday loan companies above banks and credit unions in operating hours, speed, convenience and ease of use
• Customers rate faxless payday loan companies similar to banks – ahead of credit unions – in the respect and level of service received
• Customers indicate they prefer pay day loans because they only need a small amount of money for a short period of time
• Customers also indicated that pay day loan companies did not judge them or require justification for needing the money; overall customer service was also rated better with pay day loan companies

Reasons for Needing a Payday Loan

• Nearly 60% cite “emergency” or “unexpected” expenses as the reason for requiring a payday loan
• Specific emergencies include unexpected car repair and maintenance, extended sick leave from work, job transition and unexpected medical expenses
• Customers often require only a small amount until their next payday
• They prefer to borrow a few hundred dollars rather than seeking additional credit with a credit card or line of credit
• 18% use payday loans to avoid bouncing a check or avoid incurring late charges on bills

With these findings as collected by Pollara, it seems clear that payday loans in Manitoba are clearly tools used by educated consumers of solid income. Once again, the image of exploitation simply doesn’t pass muster.