Survey: 90% of borrowers regret having taken out a personal loan

DebtHammer.org results show 80% say their short-term loan made their financial situation worse instead of helping them

Low-income households see savings as impossible, but with the right strategy, it is possible to build up an emergency fund that can avoid the need for payday loans.

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

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

They are so popular that there are approximately 23,000 payday lenders across the country, double the number of McDonald’s restaurants in America. Loans are 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 start. Most borrowers cannot afford to repay the original loan, which can trap them in a long-term debt cycle.

And that leads to long term regrets. How much? To mark International Banking Day on December 4th, DebtHammer.org set out to learn. We surveyed more than 250 Americans from September 8 to 14 to study the impact of payday loans on borrowers.

Here are the main conclusions:

They do not improve financial well-being: over 90% of respondents said they regret taking their initial loan. About 80% of those surveyed said their payday loan left them worse off than before they took out the loan. This can be particularly troubling in cities with payday loan problems.

Borrowers don’t use them for emergencies: Only around 23% of those surveyed said they used the money to cover a sudden and unexpected expense, like a car repair or a medical bill. The majority used them to cover daily expenses like groceries, credit card bills, utility bills, rent or mortgage, gasoline or prescription drugs.

Short-term loans don’t help in the long term: Around 65% of those surveyed said they had to avoid paying another bill to pay off their loans. This is particularly troubling given that a previous DebtHammer survey found that 58% of Americans expect to take out a payday or other short-term loan to pay for their holiday season.

Read the full report at: https://debthammer.org/payday-loans-survey.

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. Full data sets are available on request.

Advice from the experts:

What do you think is the biggest financial challenge Americans face today?

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. In addition, there is a lot of uncertainty given that expiring benefits are difficult to know what will follow.
Dr Matthew Harding
Professor of Economics and Statistics & Director of the Deep Data Lab, University of California, Irvine (responses 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. What do you think they should prioritize?

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

Rebecca stumpf
DebtHammer.org
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