In the latest of a series of research reports, the Center for Responsible Lending (CRL) has found that payday loan customers remain indebted double the time that the Federal Deposit Insurance Corporation recommends.
“Payday Loans Inc.: Short on Credit, Long on Debt” verifies how what begins as usually a two-week, small-dollar loan becomes a deepening pit of debt lasting on average 212 days in the first year of borrowing and growing to 372 days in the succeeding year. Yet, according to FDIC guidance, no Payday borrower should be indebted for more than 90 days in any 12-month period.
The report also shows how the size of these loans grow over time as well. Although the first Payday loan is typically only $279, the average customer will borrow more in principal and reaches $466 over time. The catch is that as the amount borrowed increases, so do the applicable fees and interest that the borrower must also pay. According to CRL, much of the problem with fully retiring payday debt is due to the industry requirement that borrowers pay the entire loan with the next paycheck. For most borrowers, this specific loan term denies them the ability to financially manage the rest of their lives. The financial burden of only having two weeks to repay can be insurmountable. For many borrowers, even a $300 loan eats up all remaining funds after the borrower has paid for just their most basic living expenses, because they have such a short time to pay the loan back.
At a time when so many people of modest means are striving to financially piece their lives together, dollars are particularly dear. Quick cash may be available from payday lenders. But, there is nothing quick about getting rid of that debt. Borrowers beware.
If you have Payday Loans that you are struggling to repay, or are caught up in the seemingly never ending cycle of renewing loans, DMCC can help.
Click Here to learn about DMCC’s Pay Day Loan Assistance.
DMCC is a 501 (c)3 nonprofit organization committed to educating consumers on financial issues and providing personal assistance to consumers who have become overextended with debt. Education is provided free of charge to consumers, as well as personal counseling to identify the best options for the repayment of their debt. To speak to a certified credit counselor, call toll-free 866-618-3328 or email contact@dmcconline.org. DMCC is located at 3310 N. Federal Highway, Lighthouse Point, FL 33064.