The average payday loan in the US last year was around $375, often taken out for 3-6 weeks. The rates charged and amount you can borrow may vary from state-to-state depending on legislation surrounding price caps and the number of loans you can take out. Whilst most Americans use payday loan products for one-off emergencies, some studies show that borrowers will use this product up to 4 times a year as a way to tide them over each month.
- In 2021, the average payday loan was $375 and was paid back within two weeks of it being taken out.
- Over 12 million Americans use payday loans each year to help them get by.
- Some lenders only offer smaller loans, while some offer up to $35,000.
- When repaying a loan, you must also pay the interest added to it. This represents the cost of borrowing.
- Not all US states authorize payday loans – 13, such as New York and New Jersey, prohibit them.
How Big is The Average Payday Loan?
Nationwide in the US, the average loan was $375 in 2021.
When paying back loans, it is not just the $375 that a borrower borrowed that needs paying back, as illustrated in our example:
Let’s say you borrow $375 for two weeks. The APR applied to your loan is 400% – which is around the average going rate. The APR (applied to the two weeks) therefore totals $57.53, and that is the cost of borrowing. Therefore you pay back your loan plus interest, which is $375 + $57.53. The total you owe is $432.53.
However, this amount is not representative of all states. While some states ban loans altogether, some allow them but have strict rules in place. For instance, California caps loans at $300, meaning you cannot borrow more than that as part of one loan.
Why Are The Average Payday Loans Used For?
Payday loans are there for urgent situations. If you are not desperate for cash, these are not for you. While they are quick, convenient, and pretty easy to get hold of, they are also expensive, stressful, and can damage your credit score – especially if you don’t pay them off on time.
That’s why most payday loan borrowers use their funds to cover emergency costs, such as covering:
- Medical bills
- Dental bills
- Veterinary bills
- Car or home repair
- Credit card bills
Payday loans should not be used to cover frivolous spending such as impulse buys and unnecessary subscriptions.
How Much Could I Borrow?
That will depend upon your credit history and the state where you reside, but you could be eligible to borrow up to $35,000.
Many states limit how much you can borrow, including Idaho ($1000), California ($300), Alabama ($500), and Alaska ($500).
If you have a weaker credit history, you may not be approved for a large loan. That is why it is important – if you do have debt – to pay back your debts fully and on time, as otherwise your credit score will suffer, and it will be challenging to secure a loan in the future.
I Need More Than One Loan – Can I Take Out Two At Once?
Maybe. Some states limit how many loans you can have out at once, such as payday loans in Ohio (1), California (1), and Texas (2). If your state allows you to take out multiple loans at once, and you have a means of paying them back, there is no reason as to why you would not be able to take out more than one loan at one time.
Some independent lenders may not allow you to take out multiple loans with them. If this is the case, you will need to approach another lender.