Personal loans have become the darling of the consumer financial industry.
As more people opt to borrow, lenders are increasingly able to charge higher interest rates, including the very interest rates they claim to be charging for loans.
A study released by the National Consumer Law Center found that about one in five people who take out a payday loan are charged interest rates above 4.8%, a number that’s almost three times higher than the average for the average payday loan.
(The Consumer Financial Protection Bureau estimates that the average rate for a 10-year loan is 6.6%, but that may be an estimate.)
But a new study published by the University of Michigan suggests that even a low interest rate payday loan can cost a borrower money.
The study examined data from more than 10,000 payday loan borrowers in Michigan, Pennsylvania, New York and California, and found that the interest rate charged by payday lenders in these states was more than three times the average.
The average monthly payment for payday borrowers in these three states was $5,945, which is more than five times the median monthly payment in the U.S. That’s the same amount that a typical borrower would have to make to repay their loan within a year.
In fact, the average monthly balance owed by the payday borrowers surveyed was more in the $1,600 to $2,000 range.
(This is an estimate; the study did not look at debt from credit cards or car loans.)
The data from the study shows that the median payday borrower in each state had a debt load of more than $300,000, but the median payment for borrowers with less than $100,000 in debt was only $200.
This is a stark contrast to the average loan balance, which averages about $800 in a state like Michigan, according to the National Center for Policy Analysis.
The median payment reported by the study was a whopping $1.50 for an average loan in the state of New York, but in the study, borrowers with an average monthly loan balance of less than half a million dollars reported payments of only $1 to $1 on average.
This means that the vast majority of borrowers who take a payday payday loan have a low credit score, which means that they’re unlikely to qualify for a low-interest loan.
According to the study: The average loan amount for a borrower with a credit score of 800 or below is $1 per month.
If a borrower has a credit rating of 620 or above, the loan amount is $3,929.
The loan amount reported by borrowers with a debt rating of 700 or higher is $2.88, and the average annual loan amount was $3.18.
This leaves borrowers with average monthly balances of more the $10,700 to $16,200 range.
The report also noted that payday lenders typically charge interest rates of at least 4.9% on loans under $10K, and that borrowers with credit scores below 600% may be more likely to be charged higher rates than borrowers with higher scores.
(In Michigan, the median credit score was 665.)
While the study’s authors say that they do not expect these results to be representative of the entire population, they believe that these findings have important implications for consumers and lenders.
The researchers note that payday loan rates are higher in states with higher percentages of low-income households and are higher for borrowers in the lowest income brackets.
The survey data also suggests that lenders have been working to reduce or eliminate the interest that payday loans are charged.
A spokesperson for the National Consumers League told The New York Times that “the average APR [average monthly payment] on a 10 year loan in Michigan is $9,917.”
The spokesperson added that the report “does not include the amount of interest that is paid on the loan, or how much is paid off each month.
In general, lenders charge borrowers interest at a rate of at or above 4 percent per month.”
The report notes that payday borrowers are more likely than other consumers to default on their loans, but that this can be due to a variety of factors.
For example, lenders may be underreporting the amount that they are paying on their loan and then charging the borrower interest that they should have charged in the first place.
Additionally, lenders who are able to borrow in a way that is considered less risky may charge higher rates for borrowers who are more risky borrowers.
In other words, the study found that payday lending may be a safe way to make money, but borrowers who can’t afford to pay their bills are more vulnerable to a payday lender’s predatory tactics.
