With an unsecured debt of $69,031, seniors aged 60 and over carried the highest overall debt of any age group; 22% more than the average Joe Debtor. Almost half of this debt was credit card debt, but what concerns me even more is the propensity of seniors to increasingly turn to payday loans as a credit source.
Payday Loan Use Increasing
Let’s talk payday loans for a bit. As anyone who has followed my blog posts, or listened to my rant on Debt Free in 30, knows I have a particular hatred for these types of credit products. Our recent Joe Debtor study proves that I have good reason.
If you are using payday loans you have an increased risk that you will need to file for insolvency. Our study showed that almost two in ten people who filed either bankruptcy or a consumer proposal with us over the past two years carried a payday loan. They owed on average $2,749 in total payday loan debt, or 113% of their take-home pay. So how did they end up borrowing more than their pay in payday loans? On average, a payday loan debtor actually had 3.5 payday loans. One in four payday borrowers carried five or more payday loans, and amazingly one debtor had 35 loans at the time of filing.
How is someone able to borrow from that many payday loan companies? Simple – no credit checks. If payday lenders don’t register the loan, you can easily walk into another lender to borrow a second, third or yes, 35th loan.
Payday Lenders Targeting Seniors
What bothers me even more is that more seniors are borrowing against their pension income. Payday loan companies specifically advertise that they will loan against CPP, ODSP, retirement benefits, pensions – you name it, they list it.
Almost one in 10 seniors carried at least one payday loan with the average being 3.7 loans outstanding. Among all age groups, seniors had the highest total payday loan debts outstanding at $3,693, an amount equivalent to 167% of their take-home income. Most seniors are on a fixed income, in fact 62% of all seniors with a payday loan were retired, and amazingly 35% were over the age of 70.
Payday loans are a scourge to the average debtor, and seniors are no exception. Seniors have an honest desire to pay off their debt and will do anything to try to make that happen. Most end up using payday loans to meet an immediate, necessary expense, or pay a bill, because debt payments have used up most of their income. Once the payday loan comes due, the crisis is not over. Debt payments remain and in fact, are now even higher than before. This creates a cycle of borrowing that leads to the average senior taking out almost 4 payday loans before finally admitting they need a better solution, which often means restructuring their finances by filing insolvency.
For more information on our study findings contact: