Growing up I thought a payday loan, cash advance or cash loan of any type, was meant for the poor. When driving through the urban parts of Los Angeles it’s typical to see payday loan stores. It’s easy to spot a cash advance store by the opaque windows and doors, and signs saying “fast payday loans”, “quick cash” and “cash now.” When seeing these lenders, I would imagine the types of people who would take out a payday cash loan. I pictured the same people you see in line at the welfare offices or using food stamps. The general assumption of the types of people who take out a payday loan are similar. We imagine unemployed, low income, lazy individuals in need of cash to cover expenses which they can’t afford due to irresponsible behavior.
Image of Payday Loan Customer is Outdated
That image of the payday loan customer is outdated, and unrealistic in today’s world. In order to apply for a payday loan, the borrower must be employed with a steady income, have a current bank account, and valid telephone number. This makes it impossible for a homeless person or unemployed individuals to borrow cash from a payday loan lender. The economic recession of 2008-present has left behind a path of financial instability for many Americans. There were the college graduates who were introduced to the “real world” with an inflated job market, no job creation, and layoffs affecting thousands. Not to mention the kick start of their student loan payments. Then there were the CEOs, Vice Presidents, and other upper management employees who were laid off in order to cut costs. Let’s not forget all of the other thousands of employees who were laid off across the country. In the years since the recession there has been very little job creation, salaries are stagnant, our country’s credit rating has declined, and economists suspect a double dip recession in the horizon. Meanwhile, the cost of living has increased. Food, gasoline, and utility prices have all increased in the years since the initial recession hit. Now, who do you think is is a typical payday loan customer?
Payday Loan Customer Applies and Receives Cash Via the Internet
All of these factors and more have changed the demographics of the types of people who apply for direct payday loans. Another factor is the changed image of the cash advance industry, and the ability for the payday loan customer to apply for and receive cash loans via the internet from direct payday lenders. With direct online payday loans, anyone who is over the age of 18, employed, with a bank account and valid telephone number can apply with anonymity. You no longer have to visit a seedy shop located in a strip mall in the urban part of town to receive a direct cash advance loan. Payday loan consumers can apply for a direct cash loan from direct lenders and from the comfort of their home, or via a cell phone. The applications are 100% safe and secure, and the direct cash loan is approved instantly. The cash is then wired to the payday loan customers account within one business day or sooner. The ease in which a person can apply for a cash loan from a direct lender, and economic factors have changed the face of the payday loan industry.
Typical Payday Loan Customer, Not Typical At All
According to the Community Financial Services Association of America, the payday loan customer demographics go against the stereotypical cash loan borrower image. According to a study conducted by Georgetown University, and published by the CFSA, the majority of payday loan customers are in the middle-income category. Specifically, the majority of payday loan customers make between $25k and $50k a year. The typical payday loan customer is also middle-educated, with 90% of borrowers possessing a high school diploma or greater. Fifty-four percent of payday loan customers have some college under their belt or a degree. Thirty percent of payday loan customers own a home, fifty-four percent possess major credit cards, one hundred percent have steady incomes, and one hundred percent have a checking account. The majority of payday loan customers are married, 63% have children, and 53% are under the age of 45.
As the economy changes, so do our perceptions of the working class. Short-term loans offer a temporary solution to financial difficulties. When credit cards, and other options are not within reach or take way to long to pay off, a small payday loan between $200 and $1500 can go a long way.