Phoenix’s 34-year-old certified nursing assistant, Maria Rodriguez, must choose between paying for her daughter’s asthma medicine and keeping the lights on every two weeks. Like 12 million Americans, she gets a payday loan. Maria isn’t your typical payday borrower, she has a job, a checking account, and a little savings fund that drained last month when her car’s transmission broke.

The Consumer Financial Protection Bureau estimates that the $31 billion installment loan industry serves a broad, unbiased customer base. Learn who is using these high-interest loans to better understand financial inequality in America and the failure of the traditional banking system to serve millions of working people.

The Surprising Face of Payday Borrowing

The average payday loan consumer is not unemployed or financially illiterate. A 2023 Pew Research Center research found that first-time payday borrowers spent 69% of their payment on utilities, credit card bills, and rent. Most borrowers aged 25–44, earn under $40,000, and have some college education.

Dr Lisa Servon, author of The Unbanking of America and a professor at the University of Pennsylvania, agrees: “The stereotype of payday borrowers as irresponsible consumers is totally out of touch with the truth,” These are rational actors making rational choices in an irrational environment.

Another layer of complexity emerges in geographic patterns. The states that utilize payday loans the most such as Alabama, Mississippi, and South Carolina tend to have poor opportunities for conventional banking. Payday lenders like Check Into Cash, Advance America, and online platforms such as BestUSAPayday’s eLoanWarehouse service, swoop in to fill that void, offering loans as little as $100 to $5,000, with available funding on the same day.

The Working Poor’s Safety Net

Employment status may be the least desirable: 72% of payday loan borrowers are employed, and many people hold multiple jobs. This concentration in retail, health care, and food service creates income volatility. By conventional credit standards, they are excluded from most credit products that have not been tailored to meet the needs of the modern worker.

In its Report on the Economic Well-Being of U.S. Households, the Federal Reserve discovered that 37% of Americans do not have enough money to pay for an emergency expense of $400 without going into debt or selling something. In this customer segment, ACE Cash Express, CashNetUSA, and BestUSAPayday offer an industry lifeline, albeit at APRs that can exceed 400%.

Beyond Demographics: The Psychology of Payday Borrowing

To understand why people take out payday loans, you need to look beyond just the demographics and more into the behaviour — how they think about money and about time.

Jonathan Reed, Founder & CEO at BestUSAPayday.com, points out: “When you’re being evicted tomorrow, a 400% APR loan that is due in 2 weeks doesn’t sound so bad as a deal. After rent is due and before paychecks arrive, the 28th–3rd of the month are peak application days. These are survival methods.”

The Center for Financial Services Innovation has also studied the issue and found that repeat borrowers, who account for 76% of installment lending revenue, are often more financially literate than the typical broke person; they simply have no other options. They are aware of the costs but see the problem for what it is: the cost of accessing liquidity like ATM fees but with larger amounts and more complicated terms.

The Millennial and Gen Z Shift

New evidence indicates that millennials are changing the demographics of borrowers using payday loans. With student debt of around $37,000, along with a job market now dominated by gig and on-demand work with fewer benefits, Millennials and Gen Z borrowers are more willing to try fintech-based payday alternatives.

There are companies such as Dave, Earnin and MoneyLion along with  digital payday lenders like BestUSAPayday’s online sites report that 64% of their users are age 35 or younger. With almost all of its borrowers native to the digital world, this demographic prioritizes speed and convenience over interest rates, with 83% of their borrowers responding that their main consideration was “immediate access to funds.”

An example of such a person is Sarah Kim, a graphic designer who works independently in Austin and is 28 years old. “Conventional banks look at my sporadic income and would not look at giving me a credit card increase,” she explains further. “But a client is paying late while I’m waiting to pay rent and I can get $500 from an app in literally minutes.”

The Regulatory Tightrope and Market Evolution

With changing demographics and increased regulatory scrutiny, the payday loan industry is changing. Next year, the proposed regulations from the Consumer Financial Protection Bureau would limit interest charged on most consumer loans to a 36% annual rate, fundamentally changing the business. 

In early adoption states such as Illinois and Colorado, payday loan usage has fallen by 45% after regulation. However, both of them show rising overdraft fees and utility disconnections, indicating that borrowers have not found better substitutes – they have just lost a choice.

The Uncomfortable Truth

The borrower profile for payday loans reveals an unsettling reality about the economic life of the United States: millions of working people, many of whom have education and steady employment, exist in a financial no-man’s land. They are too wealthy for the majority of assistance programs and too busy trying to survive to wait for slow-moving financial institutions.

Because the conventional distinctions between “good” and “bad” credit are becoming increasingly blurry, and because businesses such as LendUp and BestUSAPayday are experimenting with hybrid models that combine the accessibility of payday loans with the structures of installment loans, the future of the industry is still highly unpredictable. It is abundantly evident that until structural inequalities in wages, healthcare expenses, and access to financial services are addressed, payday loans will continue to serve as the unofficial safety net for the United States of America. Although they are expensive and imperfect, they provide an irreplaceable safety net for millions of people.