QoD: What percent of 18-21 year olds have considered taking out a payday loan?

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Apr 15, 2019
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Question of the Day, Financial Scams

Answer: 38%

Questions:

  • In your own words, what is a payday loan? If you don't know, take 3 minutes to conduct your own research.
  • Payday loans carry some of the highest interest rates (over 300% in some cases). Why do you think that people still take out these loans? 
  • Why do you think as people age, they are less likely to consider taking out a payday loan? 
  • While 38% of 18-21 year olds considered taking out a payday loan, only 8% actually have over the past 2 years. Why do you think there is such a gap between the intent to take out a payday loan and actually taking one out? 

Here's the ready-to-go slides for this Question of the Day that you can use in your classroom.

Behind the numbers (CNBC): 

Payday loans, also called cash advances, are typically small loans you can get in most states by walking into a store with a valid ID, proof of income and a bank account. The balance of the loan, along with the “finance charge” (the service fees and interest), is typically due two weeks later, on your next pay day.

While payday loans provide quick cash, the national average annual percentage rate is almost 400 percent. In contrast, the average credit card APR in July was 16.96 percent, according to CreditCards.com.

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About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.