Average Loan Characteristics

The average borrower will pay $475.73 in finance charges to borrow $366.94 in less than 4.5 months. If we stretch this out to reflect the way payday loan debt compounds, you will see how the average payday loan borrower will incur $2,492 in debt in a single year, with as much as $738 in associated financing costs.

  • 7.84 loans per person.
  • 62% of loans will be refinanced.
Size of Loan Probability of Refinance
$400-$500 70%
$300-$400 65%
$200-$300 55%
$100-$200 50%
$0-$100 38%

The more you borrow from a payday loan company, the more likely you are to be buried by the debt, and require additional payday loans to continue servicing the obligation.

  • $366.96 average loan amount.
  • Average finance charge = $60.
  • Average loan term = 18 days.
  • 55% of loans remain unpaid for less than 14 days.
  • 26% explicitly for 14 days which equals 1 pay period.
  • Average loan APR = 300% – 500%.
  • 95.6% of loans are written for the maximum amount legally allowed.
Loan Characteristics Payday Loan Conventional Loan Credit Card
Yearly Interest Rate (APR) 343.41% 6.5% 19%
Term Length (days) 18 60 60
Average Amount $366.36 $5,000 $1,500
Finance Charge $105 $9 $20

Compared to a conventional loan, a payday loan will charge its borrower 52x more interest, or 18x more interest than even an average credit card. The will then only lend a fraction of the funds.

Qualifying Characteristics Payday Loan Conventional Loan Credit Card
Credit Score N/A 650 550
Net Worth N/A 3x the debt N/A
Debt-Servicing Ratio N/A <.4 N/A
Relationship With Bank N/A Yes N/A
Time to Borrow Instant 1-3days 1-5days

The chart below represents values based on borrowing $300 dollars and repaying that debt in one month.

Type of Credit Finance Charge APR Total Paid
Credit Card Cash Advance (AVG) $14.00 57% $314.00
Credit Card Cash Advance (high-cost) $19.00 76% $318.00
Small Personal Loan $9.00 36% $309.00
Payday Loan $105.00 426% $405.00

The chart below represents values based on borrowing $500 dollars and repaying that debt in one month.

Type of Credit Finance Charge APR Total Paid
Credit Card Cash Advance (AVG) $49.00 29% $549.00
Credit Card Cash Advance (high-cost) $67.00 39% $567.00
Small Personal Loan $38.00 36% $538.00
Payday Loan $700.00 426% $1,200.00

Compared to a conventional loan, a payday loan is obviously more accessible. However, compared to a simple credit card, the only difference is that it takes a few days longer for the borrower to gain access to money because they need to wait for the card to be mailed to them.

By waiting two days for a credit card to be express mailed to them, instead of taking out a payday loan, a borrower is saving approximately $300 in finance fees. This has the same impact as working full time for $18.75/hour for two days!