Payday Lenders Are Targeting Young People

For a long time, payday loans have been promoted as a simple and quick means for consumers to obtain money in between paychecks. There are already 23,000 payday lenders in operation nationwide, double the number of McDonald's restaurants in the country. Payday lenders prey on a wide range of Americans, but they frequently target groups that have historically been considered vulnerable. The groups most likely to have a Payday LV loan are those without a college education, renters, African Americans, those making less than $40,000 annually, and those separated or divorced. These payday loan debtors are increasingly more likely to be young people.

Even though only 6% of adult Americans have utilized payday loans in the last five years, most of these borrowers are between 18 and 24. Quick loans that do not require a credit score can be an alluring instrument to bridge personal financial voids, especially for young people, since the cost of living continues to rise faster than inflation. A 2018 CNBC survey found that roughly 40% of 18 to 21-year-olds and 51% of Millennials have given payday loans some thought.

Payday Loans are Unreliable

The people who are most susceptible to payday lenders frequently have insufficient banking or no accounts at large financial institutions, which forces them to use services like payday lending to establish credit. Payday lending's exceedingly exploitative nature and its absurdly high-interest rates, which typically exceed 300%, only serve to make issues worse. Borrowers are unable to pay off quick loans online and maintain their standard of living because of high-interest rates. Because payday lenders target remarkably low-income groups or minorities, borrowers become trapped in debt. Three out of four payday loans, according to the Consumer Financial Protection Bureau (CFPB), are obtained by borrowers who take out ten or more loans annually.

Borrowers typically use payday loans to cover ongoing expenses rather than sudden or urgent ones. These continuous costs for Generation Z and Millennials, those born in 1997 or later, include regular transportation expenses and payments on college loans. According to a 2012 Pew Charitable Trusts survey, 69% of payday loan borrowers first utilized their loans to pay for recurring expenses, while only 16% used them to cover unanticipated costs. Despite research showing that payday loans were not intended for and are ineffective at helping to pay for recurring needs, the typical borrower uses eight loans, each lasting 18 days, and as a result, averages five months of debt per year from their payday loans. Red Payday lending ultimately costs 12 million consumers in the United States $7 billion annually, with fees alone costing Americans more than $4 billion annually.

This overtly predatory sector can only continue to thrive because it exploits the rotten political climate in Washington, which favours special interests at the expense of average Americans. They have their eyes set on a new demographic: young people drowning in debt.

Youngsters already have Debt Crisis

Today's youth are more financially unstable than any previous age. The student loan debt problem is a key factor in young people's financial difficulties. The proportion of households with college loan debt doubled between 1998 and 2016. PL near me student loans are the main source of debt for members of Generation Z, with an estimated one-third of all persons between the ages of 25 and 34 having them. Although a sizeable portion of Generation Z is still too young to enroll in college and take on student loan debt, many nevertheless struggle to pay for necessities like food and transit to work and wonder about the costs of their future higher education. According to a recent Northwestern Mutual survey, Millennials have an average debt of $27,900, while members of Generation Z have an average debt of $14,700. Millennials earn 43% less than Gen Xers, those born between 1965 and 1980 earned in 1995, and young employees with debt and a college degree now earn the same as those without one did in 1989.

Young Americans who graduate from college with college loans have lower net wealth for the first time in history. The personal worth of millennials is only half that of Baby Boomers at the same age. For young African Americans, these statistics are much more concerning. Millennials: Homeownership, median net worth, and the proportion of this group saving for retirement all fell between 2013 and 2016. These elements demonstrate how common financial instability is among young people, as does the statistic that 61% of Millennials are unable to pay their own bills for three months, compared to 52% of the overall public. For people of colour, this ratio rises, with 73%of Black emerging adults and 65% of Latinx youngsters unable to meet living expenditures for three months, respectively. Given that Generation Z and the Millennials are the most varied generations in American history and that young people of colour make up most of both groups, this is especially concerning.

Youth is the Target Market for Payday Lenders

It should come as no surprise that lenders are using millennials' use of technology to boost the likelihood that they will utilize their services. The majority of those who use apps for their finances are young people. According to a 2017 survey, 48% of respondents between the ages of 18 and 24 and 35% of those between the ages of 25 and 34 use mobile banking applications once or more per week. With so many young people using well-known applications and streaming services like Snapchat and Hulu, it is understandable why app-based short-term lending providers have targeted this demographic with their marketing.

Conclusion

Compared to past generations, young people today suffer substantial financial challenges, with difficulty paying for necessities and student loans among the major sources of stress. Payday loans might be alluring because they appear like a simple and reasonable solution to get by between paychecks. However, since most payday loans are given to borrowers who obtain many payday loans each year, these loans are not a quick solution to problems.