Fifteen million Americans used small-dollar credit products in 2011, from outfits such as pawnshops, payday lenders and auto title outfits. Who borrows, why and what do they spend their loans on?
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The study included a survey of more than 1,100 consumers who had used these kinds of loans: Key factors as to who makes up this demographic are illustrated below.
According to the survey, 66 percent of small-dollar credit consumers had no savings, 59 percent had a high school education or less, and only 27 percent had a credit card. If this is a demographic that struggles with getting and establishing credit, then short-term, small-dollar loans would be appealing to them as most do not require a credit check.
The survey also asked respondents to indicate why they used a small loan, and paying utility bills was No. 1 on the list at 36 percent. Rounding out the top three were using the loan for living expenses (34 percent) and rent (18 percent). The top reasons they needed the cash in the first place? Their living expenses were consistently more than their income, they had a bill or payment due before they received their paycheck or they experienced unexpected events such as medical emergencies.