15484726201_6c5e54875a_zWho do you think relies on payday loans the most?

While you might have a mental picture of a hard-working but uneducated blue-collar employee without a credit card or a checking account, the truth is far from what the media would have you believe.

In fact, more than ever before payday loan users are often college educated. Many of them have bank accounts and credit cards. And they are often times Millennials.

But why is this? Millenials have cultivated a reputation for being smart, over-educated, under-employed, tech-savvy, and tight with their money. Millennials often avoid the expense of owning a vehicle, and have no problems with moving back in with their parents.

And yet, a study from George Washington University shows that an astounding 28% of all college educated Millennials (persons aged 23 to 35) have used payday lending at least once in the last five years.

The stereotype is that payday loan customers are poor people and uneducated people… but like most stereotypes, that is wrong. It always has been wrong, only now it is more wrong than ever before.

It has always benefitted the opponents of payday loans (mostly the big banks, who don’t like anyone else to do what they do) to portray payday loan clients as victims. But here is proof that a great many of these clients are in fact world-savvy and self aware. These are educated people, thinking people, who choose these short-term, small-dollar loans over other forms of borrowing.

2314507559_f0b038bfb8_zAnd it’s not by necessity, either. It would be one thing if these Millennial Americans simply had no other choice for borrowing, but this is not the case at all. Of these payday loan friendly Millennials, 35% of them already had credit cards, and almost 40% of them have active bank accounts. That means a substantial portion of these borrowers had at least one other financial option, and elected to take out a payday loan.

But the question remains, why is the Millennial moving towards payday loans in such large numbers? Well, there are several possible factors:

  • Timely Money: Bank loans can take weeks to get approved. Payday loans take hours, many times the money is put into their account on the same day. Why wait if you can get the cash today?
  • Credit Doesn’t Matter: Payday loans do not affect one’s credit score. By the same token, credit scores are not a factor in being approved for the payday loan.
  • Helps Cash-Strapped Clients: A well-timed short-term loan can cost less than bouncing a check or incurring a late fee or an overdraft fee. Borrowing a few bucks for a few days can be the smart financial decision.

To say there is one overriding reason (a one-size-fits-all reason) is faulty logic. Every case and every borrower is different, but one or more of these factors probably plays a role for most Millennial borrowers.

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