IT’S TIME TO PAYDAY STOP LOANS THE DEBT IN INDIANA TRAP PAYDAY LOANS are sold as a solution to a financial shortfall, but the average 391% APR borrower borrows repeatedly and is in debt The annual percentage rate (APR) for payday loans in Indiana is capped at for five months. 391%. This is simply TOO HIGH.
Profile of the Typical COMPARE: Total Cost of a Payday Loan Borrower $300 Loan by Debt Type Payday loan borrowers typically reborrow again Rents housing and again, taking an average of 10 loans a year and spending five months in debt. That amounts Education less than a college degree to about $440 in fees, when the same balance Household income below $40,000 per year carried on a sub-prime credit card would cost about $20. Recently separated or divorced Has fallen behind on bills $800 382% APR $700
Indiana Payday Loan $600 Re-borrowing Rates $500 82 percent of payday loan borrowers borrow another loan within 30 days of paying off the first. That initial loan, intended to be a short-term cover for financial shortfall, can easily become a long-term financial $400 burden. 22.2% Days Passed Since Paying Off Payday Loan Before Borrower Borrows Again OF COST THETOTAL LOAN $300
TIMELINE 0 DAYS 7 DAYS 14 DAYS 21 DAYS 28 DAYS $200 1 WEEK 2 WEEKS 3 WEEKS 4 WEEKS
$100
60% 68% 77% 82% Sub-prime Repeat Borrowing Credit Card of Payday Loans BORROW AGAIN BORROW AGAIN BORROW AGAIN BORROW AGAIN THE SAME WITHIN WITHIN WITHIN Fees and interest accruing over 5 months DAY 7 DAYS 14 DAYS 30 DAYS All loans have a starting balance of $300
SOURCES: Typical Borrower: Pew Charitable Trusts, 2012 Re-borrowing Rates: Consumer Financial Protection Bureau, 2016 PAYDAY THE EFFECTS LOANS ON OUR IN INDIANA ECONOMY
Payday Loans May Drive How does Indiana fare? Borrowers into Bankruptcy Not well. Indiana ranks 44th in the nation for bankruptcy. And Hoosiers and their communities lose In one study, the number of people declaring Chapter 13 about $70 million a year in payday loan fees. e bankruptcy DOUBLED AMONG PAYDAY BORROWERS n o compared with similarly situated applicants who did not qualify Best (Lowest) g #1 million for a payday loan. Bankruptcy Rate $70
#10
#20
#30
#40 #44 #50 Took Out a Payday Loan No Payday Loan Worst Rate 1 arrow = $1 million
Payday Loan Borrowers Are Most Want Stronger More Likely To... Payday-Lending Regulation 70% of Americans — including 70% of payday borrowers — want regulation of this industry.
Face serious credit Use Supplemental Lose their bank card delinquency Nutrition Assistance accounts due to within one year Program (SNAP) multiple overdrafts (twice as likely) 70%
Fall behind Fall behind on Delay medical on rent child support care 0% 20% 40% 60% 80% 100%
SOURCES: Americans Wanting Regulation: Pew Research Center, 2017 Center for Responsible Lending, 2016