Survey Unveils Payday Loans as America’s Top Quick Cash Fix, Followed By Pawnshop Loans

A short-term loan may be the only viable option for many people who cannot access traditional sources of financing, such as installment loans and credit, particularly when cash is needed quickly. This is especially relevant for people with poor credit or no established credit history. 

The typical options include accessing money through pawnshop loans, payday loans, and title loans. 

A pawnshop loan provides a quick and convenient way to borrow money, partly because there are an estimated 10,000 pawnshops scattered around the country. The way a pawnshop loan works is that you would provide an item of value, such as jewelry, as collateral, and the shop would provide a loan based on its value. 

Should you fail to repay the loan, the shop will resell your item(s). However, accessing loans via pawnshops comes with significant downsides — they come with high fees, and you won’t be able to build any credit history. 

A payday loan, or a cash advance, is a loan of a small amount typically due a couple of weeks after it is borrowed. Payday loans are high-interest loans that lenders make based on your income levels, which generally correspond to a portion of your next paycheck. In some cases, people who cannot repay the loan then roll it over into a new loan, further putting them into debt.

Title loans, on the other hand, are short-term loans that use a car as collateral. They offer borrowers quick access to money, even those with a history of bad credit, but the downside is that they typically come with high costs. And if you don’t repay the loan, the lender can take your car.

We recently commissioned a survey of 3,000 Americans to gauge their relationship with short-term loans, particularly pawnshop loans. 

Our survey found that when it comes to accessing short-term credit, payday loans are by far the most popular option, followed by pawnshop loans, loans from friends and family, and car title loans. 

On that note, 70% of loan takers said that the speed at which they could access the additional funds was extremely important and one of the primary considerations when choosing a loan provider.

“Borrowing against your future income can relieve a financial squeeze, but it should be done very rarely and only after weighing other options,” said Erica Sandberg, BadCredit Consumer Finance Expert. “The fact is, you’ll be paying dearly for the convenience and immediacy because the associated fees tend to be high. Not only that, you’ll have less money to work with when you get your next paycheck.” 

The survey data also identified where people are more likely to access short-term loans. The top 10 were as follows:

A clear trend shows that all of the top 10 cities are big metropolitan areas in some of the most populated states in the country. This is perhaps indicative of the fast pace of these big cities and the high cost of living. 

Here is the rest of the 125 cities identified through our study as places where people are most likely to access short-term loans:

When posed the question as to why people had accessed short-term loans, their responses were as follows:

• Unexpected expenses (e.g., car repair, medical bill): 46%.
• Day-to-day expenses (e.g., rent, groceries): 35%
• Financial emergency or job loss: 19%

But what is stopping some people from accessing a loan when they need it? Approximately 41% of Americans surveyed cited high interest rates as the most challenging factor when looking at short-term loan options. Another 27% said that the repayment terms often put them off, while 17% said the risk of losing their possessions, like a car or jewelry, was enough to prevent them from taking the risk.

We also asked survey respondents which type of short-term loan they found has the most reasonable terms. Approximately 44% said payday loans were the most reasonable, followed by pawnshop loans (32%) and car title loans (24%).

Overall, the attitude toward short-term loans looks positive, with the majority of respondents seeing them as a valuable tool for accessing necessary funds. In fact, 45% said they believe they positively affect their local community. 

However, as with any agreement, you’ll want to bear in mind a few things when signing up for a short-term loan. Here are a few things to look for:

1. Interest rates: This essentially determines how much you’ll end up spending on your loan. Short-term loans typically have quite high interest rates, which means you will end up paying back a lot more money than you originally borrowed.

2. Loan term: This refers to how long you have to pay back the loan. The loan term will also determine how much your monthly repayments need to be and how much interest you’ll pay.

3. Collateral: You need to consider what happens if you can’t pay back the loan. Do you need to put up any collateral? For instance, if you’re getting a loan from a pawnshop, you may need to put up something valuable in exchange. Would you be prepared to lose this item if things didn’t work out?

4. Availability of funds: Most people who take out short-term loans need immediate access to the funds. How quickly you can get the money may determine which loan provider you choose.

5. Your eligibility: You’ll also need to check that you qualify for the loan you are considering. Your income and bank account deposit history may all play a part in determining your eligibility for a short-term loan.

“In the end, the best way to manage your money is to spend what you have in your pocket (or bank) without having to take out any type of loan,” said Erica. “If you do experience a shortfall and you need cash fast, any of these options can help, but you may be better off rearranging your expenses to free up funds, taking on a gig assignment, or selling unnecessary assets.”

We surveyed 3,000 adults who were carefully chosen from a geographically representative online panel of double-opt-in members. This selection was further tailored to meet the precise criteria required for each unique survey.

Throughout the survey, we designed questions to carefully screen and authenticate respondents, guaranteeing the survey’s alignment with the ideal participants.

To ensure the integrity of our data collection, we employed an array of data quality methods, alongside conventional measures such as digital fingerprinting, bot checks, geo-verification, and speeding detection.

Each response underwent a thorough review by a dedicated team member to ensure quality and contextual accuracy. Our commitment extended to open-ended responses, subjecting them to scrutiny for gibberish answers and plagiarism detection.