Many people assume that the vast majority of payday loan customers are living around the poverty line, relying on these facilities because they have nowhere else to turn. There is undeniable truth to this impression as some customers are black listed from other financial institutions and once upon a time this type of finance was much more freely available to those with poor credit scores who were unable to find credit anywhere else. The danger then of course was that these customers were in no position to make repayments. This led to a massive and sweeping reform of the payday loan market to make these loans safer.

Even before these changes were implemented there was considerable evidence to suggest that the people seeking online loans were not always who you might think. Demographic info published by payday loan provider Wonga reveals that nearly 60% of customers are women and that they are overwhelmingly younger than the 39% of older (55+) men who also use the service.

To understand the average customer better we need to ask some key questions;

What are payday loans used for?

Payday loans are typically used to cover unexpected expenses. These can include household and vehicle repair bills that simply can't wait. Medical bills are also a pressing concern depending on where you live. The underlying theme these reasons all share is they are unexpected and require quick payment. This is the main strength of the payday loan and the reason many people use them. 

Ease of access and speed 

With traditional lending, you may need to wait several days to gain access to the funds that you need, one of the main selling points of the payday loan is a same-day cash turnaround. Some proclaim that you can get your cash in 15 minutes in certain conditions. The convenience can't be overlooked either. Application is possible wherever you are as long as you have a device to connect to the internet with. It takes a few minutes to apply with no face to face interactions, no physical transfer of information takes place, which speeds the whole process up and makes the whole experience easier.

Tightened legislation

Legislation has been tightened up in many additional territories since the UK reform in 2014. The National Credit Act was introduced the same year in South Africa to ensure lenders were more stringent when running affordability checks. The Act was designed to prevent reckless lending to people who couldn't realistically pay back the money on time. There has been a move towards longer-term lending with more conservative repayment plans. 

In the UK, the average figure for a payday loan is £260. Loans are paid back within 22 days on average, and default charges cannot exceed £15 since new legislation was introduced. 

Tackling payday loan debt and improving education

Despite the reforms in the industry there are still those finding themselves in financial trouble after taking out a loan. This is where financial education becomes so important. We recommend researching the 'snowball' method to tackle the debt. People can create a list of their debts, starting with the smallest and ending with the largest. They can make at least the minimum payment on each debt and tackle the smallest debt first. The idea is to work through all the debts until they are all repaid. Of course this is much easier said than done!