Survey: 90% of borrowers regret having taken out a personal loan results show 80% say their short-term loan has made their financial situation worse rather than helping it

Low-income households find saving impossible, but with the right strategy, it is possible to build an emergency fund that can ward off the need for payday loans.

– Dr. Robert H. Scott III, Professor at Monmouth University

AUSTIN, TEXAS, USA, December 1, 2021 / — Payday loans are a common source of quick cash for low-income borrowers in the United States

They’re so popular that there are about 23,000 payday lenders across the country, double the number of McDonald’s restaurants in America. Lending is lucrative for payday lenders—it’s a $9 billion industry—but expensive for borrowers. The national average annual percentage rate (APR) is 400%, but that’s just the beginning. Most borrowers cannot afford to repay the original loan, which can trap them in a cycle of long-term debt.

And that leads to long-term regret. How many? To mark International Banking Day on December 4, decided to learn. We surveyed more than 250 Americans from September 8-14 to study the impact of payday loans on borrowers.

Here are the main results:

They do not improve financial well-being: more than 90% of respondents said they regretted taking out their original loan. About 80% of respondents said their payday loan left them worse off than before they took out the loan. This can be especially troubling in cities with payday loan issues.

Borrowers don’t use them for emergencies: Only 23% of respondents said they used the money to cover a sudden, unexpected expense, such as a car repair or a medical bill. The majority used them to cover day-to-day expenses like groceries, credit card bills, utility bills, rent or mortgage, gas or prescription drugs.

Short-term loans don’t help in the long run: About 65% of respondents said they had to avoid paying another bill to pay off their loans. This is particularly troubling given that a previous investigation by DebtHammer revealed that 58% of Americans expect to take out a payday loan or other short-term loan to pay for their holidays.

Read the full report at:

DebtHammer is an industry leader in the fight to get Americans out of debt.

Please email [email protected] for more information or to schedule a phone or video call with DebtHammer Founder and CEO Jake Hill.

Feel free to embed any of the visuals included in the report on your website, or use or modify the raw files as needed. Complete datasets are available upon request.

Expert advice:

What do you think is the biggest financial challenge facing Americans right now?

Many Americans continue to struggle with the lack of savings. The COVID pandemic has added additional factors and we are now increasingly aware of the relationship between financial health and physical health which is still poorly understood. Plus, there’s a lot of uncertainty as benefits expire and it’s hard to know what comes next.
Dr Matthew Harding
Professor of Economics and Statistics and Director of the Deep Data Lab, University of California, Irvine (answers are in collaboration with Professor Giacomo De Giorgi, Director of the Institute of Economics and Econometrics at the Geneva School of Economics and Management, University of Geneva. )

Many Americans are struggling to get out of debt. In your opinion, what should they prioritize?

The cycle is an existential threat to their livelihoods. They must end it or they will be annihilated. It gets worse over time, so stopping it as soon as possible is essential. People tend to rationalize bad financial decisions and keep making them to justify those rationalizations. It’s best to just recognize a mistake – we all make one – and then decide what’s the best way to move forward. Of course, for many people, they may be fully aware of their situation but feel powerless to do anything about it.
Dr Alexander Brown
Professor, Department of Economics, Texas A&M University

Rebecca Stumpf
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