FARMERS BRANCH, Texas (4/27/09)--A Texas report surveyed payday borrowers in Austin, Dallas, Houston and San Antonio to examine the demographics of those using payday loans in the state and the reasons why--and can provide credit unions with insights into consumers seeking loans. Low- and moderate-income families, and single women, are the primary users of payday loans, according to the survey. Texas Appleseed announced the release of the new report--Short-term Cash, Long-term Debt: The Impact of Unregulated Lending in Texas (LoneStar Leaguer
April 15). Respondents said they used a payday lender because it is quick and easy. While payday and short-term auto title lenders provide immediate access to cash, it comes at a high price: often $20 or more per $100 borrowed in a two-week period. The Texas Appleseed report finds that 58% of payday loan borrowers had to roll over or extend loans at least once before paying them off. The rollover percentage is even higher (72%) in a 2007 national survey. Key findings of the study:
* The majority of survey respondents who needed short-term credit used it to pay for recurring basic expenses such as utilities, food and housing; * 13% of those surveyed use payday loans for short-term credit needs; * Nearly one in 10 payday borrowers uses payday loans monthly; * Over half of the payday borrowers roll over or extend their loans at least once before they can pay them off--and nearly one in four payday borrowers surveyed roll over loans multiple times. As a result, the cost to borrow money frequently exceeds the original loan principal; * A majority of payday borrowers are in their 20s and 30s; * 59% of borrowers are women, many of them single women and single mothers; * Although payday borrowers include all major ethnic groups, a disproportionately high percentage are African American and Hispanic; * Payday loan use declines with age, with two exceptions: Payday loan use increases for single women and for Caucasians in their 50s.
To read the full report, use the link.