A Few Amazing Facts About Payday loans



We keep hearing about payday loans and at some point in our lives, almost all of us have gone through such situations where we have considered taking one. We know a payday loan is a short term loan that bridges the gap between your paychecks and gets you through rough times. We know it is a type of loan that is entirely different than other traditional loans and can be accessed easily within a matter of hours or minutes.

But what typically less discussed about a payday loan is its history and statistics. In this article, we will shed some light on how a payday loan emerged and came into full swing. We will also discuss some other absolutely interesting and amazing facts about it. After reading this article, you will be well-acquainted with the payday loan process. It will also cover some useful information that may give you a pretty grasping idea of how prevalent it is which can help you decide whether you should apply for it or not.

A really old industry

The concept may seem like something contemporary but the truth is the payday loan industry has its roots dating back to the late 18th century. It was the time when many working-class individuals found the whole process of opening back accounts difficult. Therefore cheque cashing and pawnbroking practices were quite common among blue-collar workers.

These practices slowly gave rise to short term loans to help workers get through the month in times of financial issues. Much of the organized form of contemporary payday loan has its origins in these times when workers would typically extract loans prior to their wage receiving day.   

The historical capping on interest rates of payday loan

There came a time between the 1940s and 1950s when several US states capped the interest rates at almost 6%. The law was targeted at controlling the lending industry, however, it resulted in making the market illegal.

Currently, the interest rate on a payday loan is much higher and lies between 15% to 20%. But it could be even more, depending on the lender.

Modern Payday loan industry 

The modern form of industry originated about 20 years ago when a few companies started giving payday loans officially in an organized form. And within a span of two decades, the industry spread to 35 states of the US with physical as well as online existence.

Massive consumption of payday loans

The short term loan taking practice elevated since the inception of the payday loan industry. A research was conducted to analyze the statistics of payday loan consumption among the US population and it revealed that almost 30% of the US population consumes payday loans and almost 70% of them regularly extract the loan every month.

Another study revealed that the majority of the borrowers earn less than 30,000 dollars annually which means they are more common in low-income group populations.

Payday loan locations

Another factor that shows the prevalence of payday loan these days, is a vast number of payday loan stores functioning in the US. There are almost twenty thousand locations present throughout the US that offer this service.

Global presence

The prevalence of payday loans goes far beyond the US as it has spread to almost half of the countries on this planet. The top five markets where the payday loan industry is in full swing are the Netherlands, The United States, The United Kingdom, Canada, and Australia. Apart from these countries, the industry has established its roots in many other countries such as Spain, Germany, Russia, Japan and so on.

Desperation - a reason for borrowing a payday loan

There is no long and tiresome process involved with the payday loan application, however, the high-interest rate does draw some critical analysis. Even then, many people still take out such loan but why? This question prompted a group of researchers to carry out survey interviews of 703 individuals who borrowed a payday loan.

Many of the borrowers reported that they did face difficulty in repayment due to high-interest rates but they still considered taking payday loans no matter what the terms were. The reason being desperation, as many of them found themselves in such difficult situations that called for urgent fixes.

Popular among youth

A research was conducted to see which portion of the population engage in applying for a payday loan. Results showed that even though people of all demographics are involved in the payday loan taking practice, the majority of them are young individuals who do not own a college degree. The survey also revealed that people taking out such loans are typically women and white.

Colorado case

If you are looking for the best deal on a payday loan and you live in Colorado, then you are in luck. In 2010, Colorado law increased the repayment time to six months and changed it to installments from lump sum loan repay. The interest rates were also decreased to only 4% of interest on the next paycheck of the borrower.

This capping of the interest rate and change in policies resulted in the closing of almost half of the payday loan stores in Colorado. The other half functioning, therefore, operates with a schedule that is twice as busy as it was before.

So if you are in Colorado looking for a payday loan, then you must consider yourself one of the few lucky people on earth.

Bottom line

From the history of payday loans to its prevalence and global presence, we have covered almost every significant fact about this industry. Therefore, you now have a knowledge of the background of the payday loan industry and its reliability across the population.

If this article has reinforced your decision of applying for the payday loan, then we advise you to pay a visit to Personal Money Network as they connect you to a number of lenders functioning across the country and bridge the gap between loanees and good lenders.