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The Consumer Financial Protection Bureau estimates that for every five people who take out a payday loan, four will not be able to pay back the loan amount. This amounts to just 15% of people repaying all of their debts when they are due.

They also estimate that 64% of people renew their loans at least once.

Payday loans are often used for short-term emergency payments and are used by those who do not have a cash buffer or savings to make those payments. They are often used by those who have a bad credit rating and so are not eligible for other types of financing.

Payday loans for bad credit are an easy way to borrow money now and the other benefit is that the money can be in your account the same or the next day. They should never be used as a long-term solution to debt but are a good solution if I need money now.

Key Points About Defaulting On Payday Loans

  • One in every five payday loans ends up costing more in fees than the initial amount of money that is borrowed.
  • 80% of borrowers end up borrowing the same amount or more when they take out a loan
  • In some states, you have the option to roll over debt and take out another loan. The rules about payday loans vary from state to state.

What Percentage Of Borrowers Cannot Repay Their Loans?

Figures from the CFPB predict that 15-20% of all borrowers cannot repay their debts by their next payday or installment. When a payday loan is taken out you will typically set a repayment date of just after your next payday. The thought is that you will have money in your account to pay back the money in full.

You also have the option to take out an installment loan where you pay back the total amount in monthly installments. This gives you a longer period to pay but also means you will incur higher interest rates as you are borrowing the money over time.

There are many reasons that you might not be able to repay your debt – you could lose your job, you could face another emergency expense or the repayments could be higher than you anticipated.


It is not 100% but it’s close. 80% of borrowers cannot repay their payday loans when they’re due.

Top Reasons Why Borrowers Miss Repayments

Payday loans should only ever be used for emergency or unexpected expenses. However, in the US, it is estimated that 70% of payday borrowers use the money for rent, utilities, or other day-to-day expenses. They rely heavily on payday loans just to get through the month.

This means that they will not have extra money on hand to repay the loan, and they will continue to get into debt to cover the interest payments that need to be made on the loan.

Some of the reasons we see people struggling to repay debt are:

Run Out Of Cash

The profile of a payday borrower is someone that does not have lots of savings or money on hand to spend – this is why they turn to loans. Just because you borrow money this month to cover expenses doesn’t mean that you won’t need money again next month.

You might be short of money and need to choose between expenses and rent or paying back your loan. This can get borrowers into a spiral of debt. They might need $300 now to repay debts but then need the same amount next month.


Sometimes you just don’t have enough money on hand to cover all debts.

Paying Off Other Debts

Borrowers might get to the end of the month and need to make repayments on a number of different debts. 8/10 borrowers will take out another loan within 14 days – keeping them in a spiral of debt. This will make repayments difficult as they will need to pay back the money on a number of different loans at once.

Sky High APR

One reason that people can’t make repayments is that interest rates on payday loans are very high. The average APR for a payday loan sits at about 400%. Compare this to another high-interest borrowing situation, the credit card, and you can see the difference. Credit cards are considered high-interest and a typical APR is just 30%.

Payday loans are very risky and because of this the lenders make the interest rates very high to make up for the risk profile.

What Happens If I Don’t Repay A Payday Loan?

Many borrowers struggle to repay their payday loans and this can get them deep into financial trouble. They might have multiple loans and be struggling to make monthly repayments on them. This explains the fact that many payday borrowers have already taken out a loan before.

If a borrower struggles to repay a loan then the lender has a couple of options. The first thing they will do is get in touch with you to find out why you have missed the repayments. It is always good to get ahead of this kind of thing by calling them and seeing if you can set up a debt repayment plan. If they have to get in touch with you they might not look upon your situation as favorably.

If you have the money but just forget to make repayments then you could set up an ACH bank transfer. This means that the money will be taken out of your account automatically each month and will help you stay on top of repayments.

Richard Allan

Richard Allan

Richard Allan is the founder of Capital Bean and a passionate writer about personal finance, budgeting and how to save money at home and work.

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