Payday loans are an easy way to get fast cash and they come with a high cost. The typical pay day loan that is borrowed ranges from $50-$1000 and the interest can range from $15 to $20 per hundred dollars borrowed according to incharge.org. This means if $500 is borrowed then $575 could be owed back by the borrowers next pay period.
What is their target market? According to finder.com payday loans are typically taken out by those with little to no credit, are between 25-49 years of age, have kids and make $25,000 or less a year. Surveys suggest this makes up 10-12 million people in the US a year that take out the loans. In fact, according to finder.com as well, only 16% of the time the loans are used for emergencies, 69% of the time it is used for recurring payments. 3 out of 5 borrowers pay more in fees than for the amount originally borrowed and takes out at least 8 of these loans a year. For those that are living pay check to paycheck this could mean a never ending cycle of debt. Especially if these loans are being used to pay down other loans, credit cards and other liabilities.
This insight has already been noted by several states who have made payday loans or installment loans illegal including states such as Georgia, Arizona, Vermont, New Jersey, North Caroline and a few more and even some states have placed heavy regulations on those type of loans.
There is hope, however. Total revenue for this industry has seen an 11 billion dollar decrease in revenue. This being the result of poverty levels decreasing in the US.
In conclusion, what are some alternatives to borrowing funds from a greedy lender? As mentioned above, most people borrow these short term loans to take care of recurring payments and emergencies and 78% of people are living pay check to pay check. If a back up fund is already in place that financial cushion will come in handy when things get tight. Another alternative would be to start a side hustle. YouTube has endless videos on how to find a side hustle and the best ones available. There are also a number of resources that can be found just from googling and searching through Pinterest.