Payday loans are used by people who need money quickly, who often have no other way to borrow money to cover an unexpected expense. The advantage of these types of loans is that they allow you to meet your immediate financial obligations. The risk, however, is that you incur debt and incur future obligations that require future income to be fulfilled.
In this article, we will analyze the employment status of people who take out payday loans. Do they have jobs that will enable them to repay the loans in a timely manner, or are they sinking into an amount of debt without having the income to repay the loans?
At LendUp, we give loans to people to cover unexpected expenses or when they need money quickly. Due to our years of underwriting loans and working with our clients, we know a lot about the financial history of our loan recipients.
In this analysis, we will examine data on the employment characteristics of Americans who turn to payday loans. How many people who turn to payday loans have jobs? Are they employed full time and where do they work?
We found that the overwhelming majority of payday loan recipients (81.2%) are employed full-time. When you add the number of beneficiaries who work part-time or are already retired, that’s well over 90% of beneficiaries. Most often, payday loan recipients work in sales, office, and health care support. The most common employer for LendUp users looking for a payday loan is Walmart, followed by Kaiser, Target, and Home Depot.
As part of our loan application process, we ask borrowers to indicate their employment status and current employer. For this analysis, we looked at loans from 2017 to 2020 to see the most common employment status, industries, and employers. Data is from states where LendUp currently operates (WI, MO, TX, LA, MS, TN, CA) as well as other states we have previously provided loans in (IL, KS, LA, MN, OK, OR , WA, WY) . When considering the most common employers of payday loan recipients, this dataset will reflect the largest employers in our largest markets, such as California.
To get started, let’s look at the employment status of people who get payday loans through LendUp. What percentage of loan recipients have a full-time job versus an alternative?
Source: To lend
81.2% of all payday loan recipients on LendUp have a full-time job, which means they should have income to pay off their debts. More generally, people use payday loans to cover the time difference of having an expense come in before the paycheck arrives to cover it. If you add those who are employed part-time, retired or self-employed to those who are employed full-time, you represent 96.1% of payday loan recipients. Only 1.2% of payday loan recipients are classified as unemployed.
As part of our application process, recipients of LendUp payday loans provide information about their industry. The following table breaks down loan recipients by sector:
Source: To lend
The most common industry to need a payday loan is related to sales. This could include retail workers or salespeople working on commission with an irregular pay schedule. The second most common industry is people working in offices and administration. It should be noted that the third most common category is related to health care.
Finally, let’s take a look at the companies with the most payday loan recipients. As mentioned earlier, keep in mind that this data reflects the employment base in the areas where LendUp operates and larger employers will naturally appear more often in the list below:
Source: To lend
Walmart, the largest employer in the United States, is the largest employer of payday loan recipients through LendUp. Twice as many payday loan recipients work at Walmart compared to the second most common company, Kaiser. The list is dominated by retail companies, but also health care, education and government.
In this analysis, we have shown that the vast majority of payday loan recipients work full time. Although they earn regular income, expenses arise that people do not have bank account balances to cover. Many of these people work in schools, hospitals and stores that have provided essential services throughout the pandemic. People get payday loans to cover emergency expenses, and for many Americans, these loans are the only source of funding available in an emergency or when financial need exceeds available funds.
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