Title

Payday Lending

Document Type

Article

Publication Date

2001

Published In

Journal Of Financial Counseling And Planning

Abstract

This paper analyzes payday lending. Payday lenders generally make uncollateralized loans of $100 to $500 that borrowers agree to repay within about two weeks. Annualized interest rates on these loans are typically 400% or more. This paper explains the key features of payday loan contracts, reviews data profiling payday loan customers, and examines why people use these high-cost loans. The paper also provides data on the frequency with which customers use payday loans, addressing the charge that many customers become entrapped in a revolving series of short-term debts.