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How Payday Loans Are Spent

Written By On 22/12/2013

The Institute for Public Policy Research conducted a survey on payday loans to find out what order of importance borrowers are choosing to spend their money on. The think tank say on their website that their objective is 'to develop a dataset to better understand the profile of people accessing payday loans'.

The report's findings may come as no surprise to many. It showed that about forty per cent of people taking out a payday loan needed to so just to keep up with the basic essentials for their everyday cost of living.

Nearly a third of them are borrowing in order to be able pay for their energy and utility expenses. More than one fifth of others have put the money they have loaned toward their food shopping and festive presents.

Approximately one third of the loans are used to help them through another type of major emergency such as a car problem or a heating system breaking down.

The data they acquired from the survey also showed that younger borrowers tend to use their loan for less paramount circumstances, such as mobile phone fees or a good evening out on the town.

IPPR's Mathew Lawrence believes that is is more than just a financial expenses issue for these borrowers that needs to be addressed. The company's recently appointed research fellow for payday lending commented,

The fact that people are using payday loans to cover predictable expenses shows that it is also a problem of making ends meet.

However, he feels that younger borrowers use the short term loans a bit differently and added,

Young people are using payday loans to cover everyday expenses like their phone bills and rent, as well as groceries and utility bills.

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