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Payday loans are used by people who are in need of quick cash, who often have no other way to borrow money to cover an unforeseen 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 met.
In this article, we will analyze the employment status of people who take out payday loans. Do they have jobs that will allow them to repay the loans in a timely manner, or are they going into debt without having the income to repay the loans?
At LendUp, we provide loans to people to cover unforeseen expenses or when they need money quickly. As a result of our years of underwriting loans and working with our clients, we know a lot about the financial histories of our loan recipients.
In this analysis, we will review the 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%) have full-time jobs. When you add the number of beneficiaries who work part-time or are already retired, that represents well over 90% of beneficiaries. Most often, payday loan recipients work in sales, office and health care services. The most common employer of 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. The data comes from the states where LendUp currently operates (WI, MO, TX, LA, MS, TN, CA) as well as other states in which we have already made loans (IL, KS, LA, MN, OK, OR , WA, WY). When considering the most common employers of payday loan recipients, this data set will reflect the largest employers in our largest markets, such as California.
To get started, let’s take a look at the employment status of people who get payday loans through LendUp. What percentage of loan recipients have full-time jobs 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 some income to pay off their debts. More generally, people use payday loans to cover the jet lag of having an expense before the paycheck arrives to cover it. If you add those who are part-time, retired or self-employed to those who have full-time jobs, 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, LendUp payday loan recipients report information about their area of employment. The following graph breaks down loan recipients by sector:
Source: To lend
The most common industry for needing a payday loan is related to sales. This could include retail workers or salespeople working on commission with an erratic pay schedule. The second most common industry is that of people working in office and administration. It should be noted that the third most common category relates to health care.
Finally, let’s 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 that the larger employers will naturally appear in the list below more often:
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 healthcare, education and government.
In this analysis, we have shown that the vast majority of payday loan recipients are employed full time. Despite earning a regular income, expenses arise that people do not have with 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 urgent expenses, and for many Americans, these loans are the only source of funding available in times of emergency or when financial needs exceed available funds.
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To note: If you’re a business that wants to work with Priceonomics to turn your data into compelling stories, learn more about Priceonomics Data Studio.
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