Report Shows Millennials Turn to Payday Loans
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UPDATED: Jun 21, 2013
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A new report from Think Finance has found that Millennials are turning to payday loans amidst the ongoing but struggling economic recovery. Interestingly, many of these Millennials have not had negative experiences with modern cash advance loans.
According to the report, 45 percent of Millennials indicated that they used alternative financial products or services such as check cashing, pawn shops, and payday loans. Out of this 45 percent, a whopping 81 percent said that emergency credit options, such as instant loans, are at least somewhat important to them. This is because, according to the report, less than half of Millennials have an emergency savings fund of at least $1,000.
Even more shocking is that Millennials who have used payday loans considered most of their experiences to be generally positive. At least two-thirds of Millennials reported that they had a very positive or somewhat positive experience using instant loans and cash advances — a far cry from constant reports citing consumer activists’ negative opinions on payday loans.
Forty-two percent of the Millennials polled found payday loans to be convenient and felt they had more predictable fees than conventional financial services. Thirty percent noted that alternative financial service products, like instant loans, better met their needs.
The report also explained that Millennials, a generation born and raised on the internet and now interconnected with smartphones, expect to be able to access financial services through technology. In fact, 56 percent favored handling their banking needs via online banking. Twenty-nine percent said that they use mobile applications to manage their finances.
However, Millennials were reported to be very fee-minded. A whopping 83 percent considered fees to be the most important factor in choosing a financial services provider. Another 56 percent felt that low or non-existent fees were the most important factors in choosing a lender, while 48 percent felt that easy to understand fees were the most important. Forty-three percent prioritized no overdraft fees.
Unsurprisingly, 59 percent believe that online access to accounts is an important consideration to think about. This same desire for convenience is reflected in the fact that 55 percent of Millennials prioritized convenient branch locations and 24/7 access to their money.
Despite these positive and understandable desires, Millennials do share financial concerns about the future.
Nearly three-fourths of Millennials are worried about having enough money for retirement. Over 70 percent are worried about unaffordable health care costs. Sixty-four percent have some worry about paying their rent or mortgage. That same number of respondents is worried that they will never be able to buy a home — no doubt due to the ever-increasing burden of student loan debt.
Unfortunately, Millennials have a fairly negative view of the future and their prospects as a generation.
Eighty-one percent believe that the economy is currently fair or poor. However, 67 percent of the polled Millennials believe that things will either stay the same or actually get worse within the coming year.
Over three-fourths of Millennials believe that it is very difficult to find a well-paying job, with 64 percent sayi they feel underpaid for their work. Seventy percent of Millennials said that it was easier for their parents to achieve the American Dream and 60 percent believe that their parents had much better opportunities for building careers.
However, as bad as things seem in the near-term for Millennials, most feel that they will succeed in the long run. Sixty-three percent believe that they will be more financially successful than their parents in due time. Fifty-five percent believe that their personal financial condition will be better in one year while 79 percent expect to be better off in a decade.
Kelly Ann Doherty, Director of Corporate Communications at Think Finance, told loans.org in an email that Millennials will continue to turn to alternative financial services, like payday loans, to meet their financial needs in the future.
“This generation is incredibly tech savvy, they value convenience and transparency and they are not afraid to look for solutions outside of the traditional banking system,” said Doherty. “The pressures on Millennials, from student loan debt to the challenges of securing a well-paying job in today’s environment, weigh on this generation and as a result they will continue to look for new technology and services that meet their unique financial needs.”
Far from just being tech savvy, Millennials have adapted to the weak job market in order to pay off their student loans, as noted by an NPR story covering Millennial entrepreneurship and micro-businesses.
This same fearlessness in the face of adversity is what permits confident Millennials to use cash advance loan products knowing their resourcefulness will repay their debts in time. As Millennials grow more confident in their abilities to work and generate income, the very nature of the Payday Loan War and anti-payday loan sentiment will no doubt change due to an influx of positive and supportive customers aged 19 to 30.
However, if the worst fears of Millennials are realized, then no amount of optimism will be able to pay back millions of dollars worth of instant loans, let alone billions of dollars of student loans.