In a study released by Hoyes Michalos, we know that payday loans are a big problem. This is especially true for people who are already carrying high levels of credit card and other revolving debt. What’s particularly worrying to me is the astounding numbers around seniors (ages 60+) who use payday loans. Like many of our clients who turn to payday loans, seniors are using their payday loan to pay off pre-existing debt. However the average payday loan debt owed by a senior is higher than any other age category, which should raise an alarm.
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 there is an increased risk that you will need to file for insolvency. Our study showed that 1 in 4 people who filed either bankruptcy or a consumer proposal with us over the past two years carried a payday loan. They owed on average $2,997 in total payday loan debt, or 121% of their monthly 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 3.4 payday loans. The average loan size being taken out was $891, which is up 12% from $794 in 2015. One debtor even had 23 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, 23rd 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.
Our study shows that 11% of seniors carry at least one payday loan with the average being 3.1 loans outstanding. Among all age groups, seniors had the highest total payday loan debts outstanding at $3,593, an amount equivalent to 158% of their monthly take-home income. Most seniors are on a fixed income, in fact 62% of all seniors with a payday loan were retired, and amazingly 32% 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 over three 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: