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The Ugly

Even With Critics, Payday Loan Industry Still Growing

Payday quick loans have come under intense scrutiny from both the government and consumer groups. Each of these groups cites numerous studies which supposedly support its claim that payday loans are harmful to consumers and lead to further financial problems. Despite all of this, payday loan companies continue to thrive.

With banks and other traditional types of lenders making credit harder to get, the average consumer has been forced to seek out other sources of quick cash. Even with the heated debate about the dangers of payday type loans still raging, cash-strapped individuals are finding cash advance loans a simple and easy way to get funds with almost no waiting period.

With well over 100 million payday loans written each year, this much-maligned segment of the financial industry generates over $30 billion in loan volume, as well. With that number expected to grow in the coming year, it's apparent that consumers are not being scared off by the negative publicity.

Welcome to the Debt Trap

All payday loan companies operate in basically the same way. They offer borrowers immediate access to cash loans funds with the loan being fully due and payable (including a hefty fee) at the customer's next payday (usually two weeks maximum). For a typical $350 loan, the fee charged would be nearly $60.

Nearly 75% of payday loan volume is generated by borrowers who cannot repay their loans in full at the end of the initial two week period and must rollover their loans for at least another two weeks. For low-income customers, this scenario almost guarantees that they will have to extend their loans and pay additional fees.

According to www.responsiblelending.org, 80% of payday loan borrowers rollover their initial loans. Other data suggests:

  • 50% of new loans are at the borrower's first opportunity.
  • 87% of new loans are taken within two weeks or before the next payday.
  • Only 6% of subsequent payday loans are generated after a month of the original loan being paid off.


This pattern of quickly re-borrowing indicates that most payday loan borrowers are unable to go even a month without having to borrow again.

With nearly 60 million payday loans being rolled over every year, it costs these borrowers nearly $3.5 billion in fees.

Payday loans increase chances of being in debt more or worse

Don't forget your other options

FastCash.org believes in transparency and full disclosure. Financially challenged consumers who are in need of quick access to quick cash should be completely aware and informed of all the options available to them, including the risks involved when choosing a payday loan. Before making a final decision, the following suggestions should be explored:

  • Talk with your creditors about skipping or delaying payments.
  • Consider asking your employer for a cash advance.
  • Calculate the fees you may be charged if you don't take out a loan (bounced checks, overdrafts, NSF).
  • Look into a cash advance on your credit cards.
  • Speak to someone at your bank or local credit union about the possibility of a small personal loan.
  • Contact friends or relatives about borrowing cash.


Check out the previous sections which discuss The Good and The Bad.