In the past 5 years, almost 6% of Americans nationwide have taken out a payday loan, according to research done by Pew Charitable Trusts. It is also striking to hear that the majority of these payday loans are used to cover everyday, recurring expenses like utility bills, mortgage and rent payments, food, or credit card payments, rather than being used for emergencies. The study found that only 16% of these loans were used for emergency situations, compared to a whopping 69% for recurring expenses.
This study also found some other facts about payday loans. Payday loans are not limited to a single income level or age. People of most ages and income levels have taken out payday loans, but it is more concentrated in younger people and in people who earn less than $40,000 a year. It was also found that borrowers will be typically African-American, lack a 4-year college degree, be separated or divorced, or be renters rather than homeowners. About 75% of these borrowers will go to a physical lender for these loans. The remaining 25% turn to online sources. These borrowers will usually take out 8 loans a year.