How Many People Use Payday Loans In The US?

Author · Modified on 19 October, 2023

As many as 12 million every year are using payday loans in the US. And given that there are approximately 23,000 payday lenders in the US, that means that each lender provides an average of 522 loans annually.

Key Points:


  • Around 12 million Americans take out payday loans every year, with an average repayment term of two weeks.
  • The average loan in 2021 was $375.
  • There are 23,000 lenders operating in the US.
  • 75% of borrowers have taken out a payday loan before, with renters more likely to borrow than homeowners.
  • California is home to the highest number of lenders in a state, with over 2,100 lending within state boundaries.
  • Payday loans are authorized in 37 states, with states such as New York and Virginia prohibiting them.


What is a Payday Loan?

Payday loans are typically short term loans with high interest rates, generally used as a means to deal with short-term financial hardships. These can include unexpected medical bills or the cost of a car repair.

Payday loans should not be considered a long-term financial solution, as they come with high interest, and are therefore costly and unsustainable to consistently use.


Who Uses Payday Loans?


Given that there are so many borrowers, there is no one category of those who use these loans.

Notwithstanding that:

  • The average income of borrowers is $30,000 annually,
  • 75% of those borrowers have taken out a payday loan before,
  • Homeowners are 57% less likely than those who rent to take out a payday loan,
  • Parents are more likely than those without children to take out payday loans, and
  • Those with student debt are common consumers of the loans, explaining why 18-44 year olds make up a high proportion of borrowers.

58% of these borrowers are reported to have trouble meeting their monthly expenses, and only around 14% of borrowers can comfortably repay their loans and the interest that comes with them. Those who default on payments face the consequences of not meeting the terms of their contract.

These consequences include additional fees, damage to their credit score, and higher cost of borrowing in the future.


Which States Lend The Most?


California boasts the highest number of lenders – over 2,100. They are closely followed by Texas, Tennessee and Mississippi. At the other end of the spectrum, Rhode Island has the least amount of lenders within the states who allow lending.

Some states prohibit payday lending altogether. While 37 states have authorised lending, states such as New York, New Jersey and Maryland have tried to protect consumers through barring these high interest and unsustainable loans.


new york
States such as New York prohibit payday lending


What If A Payday Loan Isn’t For Me?


Payday loans have strings attached and are not the best choice for everyone. Maybe you know you may have trouble sticking to your repayment agreement, or maybe you don’t want to mount up additional debt in high interest. If that’s the case, then there are alternative means of securing funds that you could consider.

You could approach your friends and family for a personal loan, which are typically more flexible than those from lenders. You may choose to approach your employer for financial assistance, namely in the form of a cash advance.

Another alternative is to take a look at your outgoings and choose to draw up a new budget, maybe through using a mobile application like Honeydue. If you are in desperate need of money and aren’t quite sure what to do, you could get in touch with a financial adviser to help you make the best and most informed decision.


How Much Can I Borrow?


The maximum amount one can legally borrow via a payday loan is $35,000, with loans available from as little as $100. The amount you can personally borrow will vary depending on what state you live in and your financial history.

While some states have banned payday loans altogether, others have caps on how much you can borrow. California’s lending cap lies at $300, Louisiana’s at $350, and Oregon’s at $50,000.

Your credit history also contributes to how much lenders are willing to lend you. If you have a strong record of paying off bills and debt, you are more attractive to a lender and will likely be granted a larger loan.


financial trouble
You should be aware of the consequences of not paying loans back


What Do Americans Put Their Loans Towards?


Payday loans are there to help you in the short term, when you have been hit with urgent and/or unforeseen costs. Typically, these loans are used to cover urgent medical or dental bills, cover home-emergencies, damage to vehicles or other necessary costs.

You cannot spend money obtained through a payday loan on anything illegal, and typically, it is prohibited to gamble using a lender’s money.

You should avoid using payday loans for high levels of debt with regular repayments. The interest on these loans is extremely high, so will become a more costly means of paying off the debt.

You should also avoid them if there is a high chance you will struggle to repay the loan. Payday lenders are harsh when it comes to those who default on payments, and you shouldn’t run the risk of running in to further problems if you struggle to repay.

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