Who uses payday loans?

Contrary to popular belief, payday loan borrowers are not only minorities, single mothers, and poverty-stricken families. They are neither uneducated nor clueless about financing options and money management. Instead, they are often established individuals with what most would consider good paying jobs. In fact, according to Patchwork Nation, a research reporting project associated with the Jefferson Institute, the demographic that this type of quick, no credit loan appeals to are lower- and moderate-income individuals and families who earn between $25,000 and $50,000 a year—sums that many fresh college graduates are just begging to make.

Many are very surprised to hear that the primary demographic payday loans appeal to are middle class parents and families, particularly when one considers how payday loans work: they require no paystubs, credit score, or collateral (barring one’s paycheck).

But given the economic climate we live in today, the issue of credit and financial history may prove to be this type of financing’s biggest draw. Patchwork Nation concluded that most payday loan borrowers do indeed have poor credit—but sagging credit scores aren’t necessarily due to low levels of education. Indeed the research firm found that most borrowers are typically not high school dropouts.

Rather, the wounded credit marks must come from something different. It’s not difficult to imagine where they may have suffered either, given the millions of foreclosures the media reports about every day, the countless lost jobs Americans have been enduring, and the severe epidemic of underemployment plaguing every facet and every age group in the nation.

Payday loans are used by those who have poor credit scores—those who cannot get other types of financing elsewhere.

Many critics like to point to emotional stories of borrowers who got caught in a severe debt trap. Without disregarding that risk, as payday loan borrowers not only should be, but need to be, aware of the inherent financial dangers of short-term, quick borrowing, many cash advance customers use this service very wisely and to their best advantage.

Surprisingly, only 14 percent of all payday loan borrowers are delinquent on a payment of any type of loan in the past year. That number is nearly three times are high for non-payday loan borrowers, as reported by American Progress, an analytic group who addresses current events and issues across the nation.

While payday loans aren’t the most ideal choice of financing, they are not used exclusively by the poor, uneducated, or underprivileged. Instead, they are used by all sorts of respectable people who simply need a means to acquire quick cash without having to bring their credit scores into the equation.