Key Payday Loan Statistics You Need to Know About
Payday loans, also known as cash advances, are short-term loans with very high interest rates used by some people to cover their expenses until the next paycheck. As the payday loan statistics reveal, the percentage of Americans using cash advances is not very high, though some demographic groups rely on payday loans more than others.
As of 2023, payday loans are regulated by law in nine and prohibited in fourteen US states and the District of Columbia. Many people believe that cash advances are predatory by nature because they tend to corner their users into what is known as a debt trap. Let’s check out the data on payday loans and see what the numbers say about it.
Top 10 Payday Loan Statistics and Facts
American borrowers spend close to $7.4 billion worth of payday loans annually.
The median income reported in payday loan applications in the US is $22,476.
34% of American borrowers get between 11 and 19 payday loans per year.
69% of Americans cite recurring expenses as the reason for taking out their first payday loan.
The average APR of a $300 payday loan in Texas is 664%.
With 2,451 storefronts, California has the highest number of payday loan lenders in the US.
9% of Americans aged between 25 and 29 have taken out a payday loan.
11% of American households with incomes between $15,000 and $25,000 are payday loan borrowers.
White Americans account for 55% of all payday loan borrowers in the US.
The average American who gets a payday loan spends five months in debt every year.
USA Payday Loan Statistics
American borrowers spend close to $7.4 billion worth of payday loans annually.
The most recent data on payday loan borrowers reveals that 12 million Americans, or 5.5% of the US adult population, take out payday loans every year. Moreover, statistics show that the average borrower gets eight loans annually, with $375 being the average amount borrowed. The average amount of interest paid by payday loan borrowers in the US is $520 per year.
(Pew Trusts)
55% of US payday loan borrowers report getting paid bi-weekly.
In contrast, payday lending statistics show that borrowers who get their salaries every week account for only 12%, while those who get them monthly account for 33% of the total. Moreover, the largest percentage of borrowers, or 75%, report employment as their primary source of income. Public benefits are the main revenue source for 18%, while retirement is the primary source of income for 4% of US payday loan borrowers.
(Consumer Finance)
The median income reported in payday loan applications in the US is $22,476.
According to payday loan user statistics, more than half, or 56%, of the borrowers receive a yearly income of between $10,000 and $30,000. A closer look at the data reveals that the lowest earning Americans, those with annual incomes of less than $10,000, account for 12% of all payday loan borrowers.
Furthermore, 31% of them fall in the $10,000 to $20,000 income range, while 25% in the $20,000 to $30,000. 16% of the borrowers report incomes between $30,000 and $40,000, 8% between $40,000 and $50,000, and 4% between $50,000 and $60,000. Finally, payday loans statistics reveal that 4% of the payday loan borrowers in the US have annual earnings of over $60,000.
(Consumer Finance)
34% of American borrowers take out between 11 and 19 payday loans per year.
Only 13% of them get one or two loans, 20% borrow between three and six, and 19% between seven and ten loans, annually. According to the stats, 14% of borrowers take out more than 20 payday loans every year. Furthermore, statistics on payday loans show that only 2% of them pay between one and two payday loan fees. A share of 9% of borrowers pay between three and six fees, while 15% between seven and ten. The vast majority of borrowers, or 43%, pay between 11 and 19 payday loan fees, and another 32% pay more than 20 payday loan fees every year.
(Consumer Finance)
69% of Americans cite recurring expenses as the reason for taking out their first payday loan.
More precisely, US payday loan statistics show that 53% got their loan to cover their regular expenses, such as utilities, car payments, and credit card debt. 10% use the money to pay their mortgage or rent, and 5% to buy food. The share of Americans who take out payday loans for unexpected emergencies is at 16%, while only 8% borrow to buy something special.
(Pew Trusts)
Only 44% of US borrowers say they would get loans from a bank if the payday loan storefronts were unavailable.
Banks and payday loans facts show that less than half of borrowers would turn to a bank for a loan if their preferred option wasn’t available. Instead, 81% say that they would rather cut their expenses, 62% would delay paying off their bills, 57% would ask for a loan from friends and family, and just as many would sell or pawn personal belongings. Moreover, only 37% of payday loan users would use a credit card as an alternative, and just 17% say they would borrow from their employers.
(Pew Trusts)
Payday Loan Interest Rates by State
The average APR of a $300 payday loan in Texas is 664%.
Texas is one of the 27 states in the US where payday loaning has no rate caps, and it had the highest average APR for 2021. Additionally, other states with very high interest rates include Nevada, Idaho, and Utah, which have an average APR of 652%, Missouri at 527%, North Dakota at 526%, and Mississippi at 521%.
(Responsible Lending)
With 2,451 storefronts, California has the highest number of payday loan lenders in the US.
Texas is a distant second with 1,675, while Tennessee is third with 1,344. Payday lending statistics by city and state also reveal that Rhode Island is the state with the fewest payday loan storefronts, with five. However, the state with the most payday lenders per capita is New Mexico, with 41.78 per 100,000, followed by South Dakota, with 40.01, and Mississippi, with 38.67.
(Dime Alley)
7% of Americans living in urban areas are payday loan borrowers.
The people living in big cities are most likely to become payday loan users, according to the stats. In comparison, only 3% of Americans living in suburban areas, 6% of those living in exurban and rural areas, and 4% of small-town Americans have taken out a payday loan.
(Pew Trusts)
Who Uses Payday Loans?
9% of Americans aged between 25 and 29 have taken out a payday loan.
Payday loan demographics reveal that the above age group has the highest rate of payday borrowers by a slight margin. Furthermore, 8% of Americans between 30 and 34 and 7% of those between 35 and 49 report having taken out a payday loan before. The youngest US adults are less likely to be payday loan borrowers, with a 5% rate, while the oldest Americans are the least likely, with a rate of only 2%.
(Pew Trusts)
11% of American households with incomes between $15,000 and $25,000 are payday loan borrowers.
This is one of the most eye-opening payday loan industry statistics. Namely, American households with annual incomes of up to $40,000 are almost three times more likely to take out a payday loan than those who earn more than $50,000. Even though there are borrowers from every income bracket, the percentages of those who earn less are notably higher.
For example, 9% of Americans with household incomes lower than $15,000 and 8% of those with incomes of between $25,000 and $40,000 are payday loan users. On the other hand, payday loans statistics show only 4% of households with earnings between $50,000 and $75,000, 3% with $75,000 to $100,000, and just 1% with incomes more than $100,000 are payday loan borrowers.
(Pew Trusts)
Only 4% of American homeowners report having used a payday loan.
In contrast, renters are considerably more likely to be payday loan borrowers, as 10% of them report having used a payday loan before. The difference between payday loan users with and without children is not so glaring, as 8% of parents and 5% of nonparents have taken advantage of these services. Additionally, payday loan facts show that the percentage of separated or divorced Americans who have taken out a payday loan is the highest, at 13%. In comparison, 10% of those living with their partners and 7% of single Americans have used payday loans before, while the shares of married and widowed borrowers are lowest, at 5% and 4%.
(Pew Trusts)
White Americans account for 55% of all payday loan borrowers in the US.
Even though this is the case, a closer look at the payday loan statistics by race in the United States reveals that they are actually the least likely group to take out payday loans. Only 4% of the entire White population in the US have borrowed before, while the percentage of Hispanics who have done it is 6%. African Americans, on the other hand, are as twice more likely than Hispanics and three times more likely than White Americans to take out a payday loan, as their share of borrowers is 12%.
(Pew Trusts)
12% of Americans who don’t work because of disabilities have taken out payday loans.
Another one of the facts about payday loans that reveal their predatory nature can be found in the statistics about borrowers by employment status. While disabled Americans are the likeliest to get them, the rate of unemployed people who report having used payday loans is 10%. In contrast, only 6% of those with a full-time job and 5% of people with a part-time job report doing the same. Furthermore, 5% of homemakers, 4% of students, and 3% of retired Americans say they have taken out a payday loan before.
(Pew Trusts)
7% of Americans with some high school education say they have used payday loans before.
Payday loan statistics show that the share of Americans who finished high school are slightly less likely to take out a payday loan than those who didn’t, as their share of borrowers is 6%. Moreover, the percentage of payday loan users among Americans with some college education is also 7%, while the share of people with a college degree who used payday loan services is notably lower at only 3%. Finally, Americans with postgrad education are the least likely to be a part of the payday loan industry, as only 2% of them report ever getting a payday loan.
(Pew Trusts)
The average American who gets a payday loan spends five months in debt every year.
In addition, 58% of borrowers are unable to meet their monthly expenses, while the average payday loan storefront fee is $55 every two weeks. As a result, 80% of all payday loans are taken out within a two-week window of paying off a previous loan. This is why people who borrow more than 11 payday loans every year are responsible for more than three quarters of all given payday loans in the US.
(Pew Trusts)
Payday Loan Statistics 2023 – FAQ
What percentage of Americans use payday loans?
How big is the payday loan industry?
What demographics of people are most likely to use payday loans?
Do payday loans show up on your credit report?
Why do people use payday loans?
Do payday loans have high interest rates?
Conclusion
As a final note, payday loan reform statistics reveal that 75% of Americans are in favor of stronger regulation on cash advances. It is hard to tell if the people who want to see payday loan storefronts closed are actual users of these services, but one thing is certain. Payday loans do more harm than good. They are not only postponing the financial issues of their users, but more often than not, they pull them down the debt rabbit hole and create a situation that’s even worse than the initial one.
Sources:
