short term loans

Short-Term Loans by the Numbers: Who Uses Them and Why?

Take control of your money with short-term loans. These common types of loans can help you get the money you need quickly and efficiently.

When you need money quickly, it can be a challenge to find the cash ASAP. With so many loans out there, how can you decide which type of loan is right for you?

short term loans

From the benefits of short-term loans to the most common loan uses, there’s plenty to learn about these loans. Here’s what you need to know.

What Are Payday Loans?

Payday loans, also referred to as short-term loans, are small amounts of money you can borrow, usually at a high interest rate. Each loan typically has a value of about $500 or less. In most cases, payday loans are expected to be repaid by your next payday.

When you repay your short-term loan, you usually do so in a single payment. The due date for a payday loan varies based on several factors, but usually needs to be repaid in full about two to four weeks after you first take out the loan.

You can take out a payday loan either online or through a storefront payday lender. Regardless of which option you choose, a short-term loan provides you with the convenience that you want from a loan. Not only do payday loans allow you to receive the money you need almost instantly, but they’re also highly accessible.

What Are Installment Loans?

Installment loans are another type of short-term loan. However, unlike payday loans, you typically have longer to repay them. Payments are broken up into set installments, and once you complete them, you’re done.

Installment loans like those offered by Jora Credit can give you more flexibility over payday loans if you need more time to repay what you borrowed.

How Many People Use Short-Term Loans?

If you’re thinking about taking out a short-term loan, you may be wondering who uses these types of loans and why.

According to research on payday loans, approximately 6 percent of adults in the United States have taken out a short term loan within the past five years. The average age of these borrowers is 25 to 49, with the majority of payday loan borrowers belonging to Generation X. Senior citizens are the least likely to take out a short-term loan.

And nearly 45% of Americans took out some sort of personal loan within the last year. So, if you find yourself needing extra cash, you’re definitely not alone.

Financial Statistics of Short-Term Loan Borrowers

There are also many financial statistics on short-term loan borrowers that shed light on the most common payday loan uses.

Generally speaking, individuals with lower income are more likely to take out a loan than those with higher incomes. The majority of installment or payday loan borrowers fall somewhere in the $15,000 to $25,000 per year salary range, while those who make $40,000 or more a year are the least likely to use a short-term loan.

People who are either disabled or unemployed also have a higher likelihood of using short-term loans than those who are employed or don’t have a disability.

In addition to salary, there are other financial similarities among short term loan users. For example, the vast majority of short-term loan borrowers are renters. Research has even found that renters are more than twice as likely as homeowners to take out a payday loan.

Other Short-Term Loans Statistics

Education also plays an important role in a person’s likelihood of taking out a short-term loan. Most users do not have a four-year college degree, and those who do have a college education are much less likely to take out a payday loan.

In terms of marital status, those who are separated or divorced make up a considerable portion of payday or installment loan borrowers. Divorced or separated people are up to two times as likely as those who are married to use a short-term loan. Similarly, those with children have a much higher likelihood of using a payday loan to reach their financial goals.

In addition, it’s important to note that many borrowers have two options: taking out their loan in-store or online. Statistics show that up to 25 percent of short-term loan users prefer taking out their loans online rather than going in-store, which shows the convenience and accessibility of online loans.

Most Common Short-Term Loan Uses

Everyone has their own reasons for taking out a loan. However, some uses are more common than others.

Above all, the most common use is to pay for an ongoing expense. Studies have found around 69 percent of short-term loan users put their money toward covering their rent, mortgage payments, credit card bills, utilities, or food.

Meanwhile, the smallest portion of short-term loan borrowers use their loans to pay for unexpected expenses. About 16 of customers paid for an emergency medical expense, auto repair or other unexpected event with help from their loan.

Other uses include paying for college tuition, buying vehicles and consolidating debt.

Getting the Most Out of Your Short-Term Loans

Payday and installment loans are a popular and reliable way to get cash quickly. No matter what type of financial situation you’re in, a loan can help you get to where you want to be.

Remember to explore your options and consider the most common loan uses before you make a decision. Taking your time will ensure you find the short-term loan that’s perfect for what you need.

Featured Image by luxstorm from Pixabay.

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