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More Payday Loans Used to Pay for Daily Items

More Payday Loans Used to Pay for Daily Items

Payday loans have played a volatile and uncertain role during the current American recession. Many Americans have relied on payday loans as a quick fix for a one-time tight spot. But a new study on the States by Pew Charitable Trusts’ project, the Safe Small-Dollar Loans Research Project, shows that more and more people who take out payday loans are doing so with more frequency and consistency.

This report shows that seven of the 10 people who are taking out and relying on these payday loans, which often come with a steep interest rate, use them to pay for everyday items, such as food, rent and gas. That’s a staggeringly high percentage of current short-term borrowers.

As Nick Bourke told NBC Economy Watch, Its not because of some unusual need that people are turning to payday loans. Its because of some regular need.

There were a few common factors that united the 5.5 percent of adult Americans who have taken out a payday loan in the last five years. Many of these adults were parents who had an average income that was below $50,000. Many of the people that took out loans were also more commonly separated or divorced, which often meant they had more financial responsibilities for children and no joint incomes to help make payments on time and with greater ease.

Payday loan companies stand beside their product, pointing out that the terms are often clear to the customer and that the American people need a financial option in these economic times. The loans come at a steep price, often costing $15 for every $100 taken out. Most of the loans taken out are between $100 and $500, according to the Pew study. Experts advise that people who take out these loans should educate themselves on the details of the deal they agree to. Fine print can often land people in trouble, or unable to pay.

The United States is not the only country to see an increase in payday loan activity. The United Kingdom has also seen a regularly growing number of quick loans taken out every year. Between 2006 and 2010, payday loans quadrupled in the U.K. Many analysts cite the unstable job market as a major factor for the increase in short-term loans in both the United States and the United Kingdom.

Although these costly loans are a last resort, the growing numbers of people who rely on this form of credit for daily needs are hitting record highs. Debt in the United States remains a general concern for the standard American and this past spring, Congress wanted to double the interest on federal student loans, which would make it much harder for students to pay off their debts after graduation.

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20 comments

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6:48AM PDT on Sep 2, 2013

Recent study shows that only 14% of households in the USA can repay an average payday loan. I'm wondering what are the numbers for the UK.
source: Localcashguide.com

6:44AM PDT on Sep 2, 2013

http://www.care2.com/causes/more-payday-loans-used-to-pay-for-daily-items.html

6:19AM PDT on Jul 2, 2013

Wow, awesome blog, thanks for the article.
cash loans online

6:57AM PDT on Jun 1, 2013

The stuff you are penning blows out my mind.
debt consolidation shop

3:38PM PDT on Aug 22, 2012

I never recommend using short-term loans to pay for daily expenses or shopping trips. These should be reserved for emergency situations. While it is easy to get trapped in a cycle of debt, they can serve a purpose for those who use them appropriately as an alternative to costly credit card advance charges and overdrafts.

3:36PM PDT on Aug 22, 2012

I never recommend using short-term loans to pay for daily expenses or shopping trips. These should be reserved for emergency situations. While it is easy to get trapped in a cycle of debt, they can serve a purpose for those who use them appropriately as an alternative to costly credit card advance charges and overdrafts.

12:36PM PDT on Aug 18, 2012

If the GOP and Rmoney/Liaryan Corporate KOCHroach funded steal the elections qe'll be all on payday loans with Adelson as the CEO.

7:18AM PDT on Jul 22, 2012

Once you use one of these places, it's very hard to stop. Remember, you do have to pay back the money borrowed, plus a high interest payment on top. I know, I used them once and it took a very, very long time and a COLD TURKEY approach to stop.

10:23PM PDT on Jul 21, 2012

@Delores, thumbs up. I cant send stars yet.

6:25PM PDT on Jul 21, 2012

These loans are a trap, and it's hard to get out of it once they start.

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