2010 Statistical Analysis
Accurate statistics on payday lending and the payday loan industry are important, yet lacking, as the short term credit industry is targeted by several new pieces of legislation. In order to answer questions about payday lending and statistics of the industry, Personal Money Market has compiled almost 10 years of payday loan industry research into one report.
The intent of this payday lending report is to shed some light on the debate over the payday lending industry. There is a growing body of reliable research on the topic, and we have compiled as much of it was we could get our hands on.
Topics covered in the paper include:
The statistics on payday loan borrowers.
Contrary to the popular perception that payday loan borrowers tend to be from very low income brackets, research shows that the average payday loan customer makes $47,260 per year.
The cost of short-term credit options.
The cost of payday loans is often discussed in terms of annual percentage rates. Because the loans are not annual, however, this metric of measurement doesn’t apply to short term credit options. A single $35 bank overdraft fee that is repaid in one day, for example, can work out to as much as 1,277,500 percent annual interest — compared to the industry average of 300 to 400 percent annual interest.
The understandability of payday loans.
Critics of payday loans like to characterize lenders as corporations preying on customers, providing terms that are difficult to understand, at best. However, studies show that 95 percent or more of payday loan customers confirm that they understand the finance charges on payday loans. In comparison, about 20 percent of credit card customers are able to comprehend credit card agreements.
The full 42-page report can be downloaded here.
Personal Money Market does acknowledge that we have a financial stake in the short-term credit industry. However, as we are not a direct lender, we feel that we are able to provide a unique perspective on the industry and industry trends.