Studies show Payday Lending is a vicious cycle
A simple zip code search of where majority (if not all) payday loan businesses are physically located will tell you the communities they are attempting to “serve”.
Payday loans are basically a two-week advance on your paycheck (if you get paid twice a month/bi-weekly).
After further review, I discovered the havoc these loans play on monthly earners over and above the bi-weekly earner. The rules on payday lending differ for them- they can only take out renewal loans 11 times a year (after initial loan).
Here are some numbers:
As a group (bi-weekly and monthly earners)-
* 80% of loans are rolled over or followed by another loan in 14 days
* 15% of new loans is followed by a loan sequence (loan taken w/i 14 days of a loan being paid off) at least 10 loans long
* 80%+ of loan sequences that last for more than one loan, the loan size is the same or larger than the first loan when completed.
* In 11 months 64% of borrowers renew, 15% repay, 20% default
* 58% receive gov. benefits
* 40% floated their initial loan for a year (11 additional months)
What you may not realize is that these numbers only consider payday loan sequences at a SINGLE location. Many caught in this system jump between several payday loan businesses attempting to maintain all these loans.
…and I didn’t even mention the usury percentage rates they are legally allowed to charge.
What are your thoughts on payday lending? Does it help? Is it truly a service? Is it a hinderance?