It is no surprise that with a lack of bank financing over the past 5 years, consumers have turned to alternative lenders.
San Francisco, CA (PRWEB) May 09, 2013
While it is widely believed that high cost borrowing through payday loans, pawn shops and the like is a fringe behavior in America, recent research shows this is not the case. A study done by the National Bureau of Economic Research has found that 25 percent of Americans have used this high cost financing, which is now firmly rooted into the U.S. financial system.
“High-cost borrowing cannot be considered a ‘fringe’ behavior that is limited to a specific and small segment of the population,” economists Annamaria Lusardi and Carlo de Bassa Scheresberg wrote in their study. “Rather, it is firmly rooted in the American financial system and is common even for households who are generally referred to as ‘middle-class families.’”
“It is no surprise that with a lack of bank financing over the past 5 years, consumers have turned to alternative lenders,” said Terry Robinson, president of The Lending Circle, a division of Sunovis Financial.
The study found that the average consumer utilizing payday loans took out 11 such loans over a 12 month period, paying an average of $574 in fees. 25 percent of borrowers paid more than $780 in fees.
The research report goes beyond the payday loan industry to examine all forms of alternative financial services, which is an industry with an estimated $320 billion in annual transactions.
The paper was based on several separate studies, including phone interviews of close to 1,500 Americans; a state-by-state online survey of about 28,000 American adults; and a military survey of 800 service members.