A Socio-economic Examination of Payday Loan Clients: Why and How People Use Payday Loans

Abstract

This chapter reports on a small-scale mixed methods research project in Winnipeg, Canada, that explored what lower income consumers think about payday loans, why they use payday loans, and asked them to compare the typical Canadian payday loan with two alternatives. Respondents reported that various push factors, such as declining income and employment, and pull factors, such as opening of payday lender outlets and closing of bank branches in the neighbourhood, have led them to rely more on payday lenders. Some respondents had found themselves in a repeat payday loan cycle in which they needed a new loan to pay off the existing one. Other respondents used payday loans more strategically and did not get overwhelmed by payday loan fees. Respondents were then asked to compare the standard Canadian payday loan with two alternatives and this led to some very interesting results.