Can Credit Unions Help Consumers Out Of The Cycle Of Payday Loans?

by The Financial Brand

12 million Americans get a payday loan every year, racking up $7.4 billion annually in expensive debt. According to a study from Pew Charitable Trusts, the average payday loan is $375, although most borrowers end up indebted for five months and have to cough up $520. Can banks and credit unions help consumers escape the payday lending trap?

Who Uses Payday Loans?

Pew’s study found that most payday loan borrowers are white, most are female, and most are 25 to 44 years old. However, after controlling for other characteristics, there are five groups that have higher odds of having used a payday loan: home renters, those earning below $40,000 annually, those without a four-year college degree, those who are separated or divorced, and African Americans.

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