Who Uses Payday Loans – A Canadian Perspective (British Columbia)

If you’ll recall, last time we reviewed Pollara’s demographic study of payday loans use in Manitoba. Continuing our look at the demographics of those who use payday loans, let’s focus on a study conducted by Pollara that studied the demographic data for British Columbia. The survey group is 400 customers. In particular, we’ll see that consumers in British Columbia frequently choose pay day loans over approximate services offered by banks and credit unions.

Payday loan customers in BC are… ?

Much like in Manitoba, Pollara finds that the average payday loan customer in British Columbia is employed, educated and not from a low-income household. Recent demographic data paints the following portrait:

• Average customer is 40 years old
• 77% of customers are currently employed full-time
• More than half (53%) have completed post-secondary education

They know what they’re getting into

Do no fax payday loan companies take advantage of people who don’t understand the process? Evidence collected would indicate to the contrary:

• 69 percent of customers claimed to understand costs and terms of their payday loan
• This compares favorably with their understanding of mortgage fees (72 percent), credit cards (73 percent) and bank fees (68 percent)

They aren’t poor

In fact, Pollara found that overall household income for faxless pay day loan customers tends to be in line with the BC population. Fifty percent of British Columbian residents report household income of less than $50,000 each year, compared to just 56 percent of faxless payday loan customers.

The BC payday loan customer’s average credit profile

Findings indicate that British Columbia pay day loan customers have options when seeking credit and are not in dire straits:

• Customers owe $22,765 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
• Why? Customers cite convenience, ease of use and convenient business hours
• Only 21 percent used a no fax payday loan because they felt there was “no other option”

How much do they borrow?

• The average payday loan is $381.14; more than half (56 percent) borrow less than $300
• Customers expect to pay an average of $29.04 for a $100 two-week loan
• Eight-five percent of customers pay their loans on time; 13 percent pay “most” of their loans on time

How do banks and credit unions stack up with payday loans?

• Data indicates that customers prefer no fax payday loan companies for overall convenience and ability to access small-sum loans
• Banks and credit unions generally offer only larger amounts
• Hours of operation, speed, convenience, ease of use, respectfulness and good service were all listed as advantages no faxing payday loan businesses offer over banks and credit unions
• Payday loan companies in British Columbia came slightly behind banks on value, but still rated ahead of credit unions

Why do the people of British Columbia turn to payday loans?

• Two-thirds of customers (66 percent) cite “emergency” or “unexpected” expenses as the principal reason
• Seventeen percent took out a payday loan to avoid service charges on bills or bouncing checks
• A small fraction (six percent) sited the desire to “buy something”

Payday loans are a useful tool that customers in British Columbia use with caution and discretion. They are educated consumers with more than reasonable income and a variety of choices before them when they seek credit. These customers are anything but exploited; they appreciate having the option when tight financial times come.