Payday Loan Use Among Heavily Indebted Borrowers on the Rise
3 in 10 insolvent debtors turn to payday loans to make debt payments.
KITCHENER, ON, Feb. 12, 2018 /CNW/ - Payday loan use among heavily indebted Ontarians continues to escalate, as research conducted by Licensed Insolvency Trustee firm Hoyes, Michalos & Associates Inc. reveals that 3 in 10 (31%) insolvencies in Ontario in 2017 involve payday loans, up from 27% in 2016.
"This is the sixth consecutive year-over-year increase since Hoyes Michalos began to study the impact of payday loans on consumer insolvencies in Ontario," says Ted Michalos. "Insolvent borrowers are now 2.6 times more likely to have at least one payday loan outstanding when they file a bankruptcy or consumer proposal than in 2011. This is a cycle that is just not sustainable."
Insolvent debtors are taking out fewer, but larger loans according to the updated research. The average number of payday loans outstanding at the time of insolvency declined to 3.2 in 2017, after peaking at 3.5 loans in 2014. However, the average payday loan size in 2017 is $1,095, an increase of 12.4% from $974 in 2016. One in ten (9%) loans are $2,500 or more, up from 6% in 2016.
"We see clients using larger and longer-term payday style loans more than ever before," adds Doug Hoyes. "The problem is high-cost, longer term loans do not help someone who carries an average unsecured debt load of $33,461. In fact, it makes their situation much worse."
The average insolvent payday loan borrower owes $3,464 in payday loans, or $1.34 for every dollar of monthly take-home pay, on top of $29,997 in other unsecured debts. They are using payday loans to keep up with existing debt repayment.
"Most clients tell us they know payday loans are an expensive borrowing option, however they turn to payday loan companies to keep all of their other debt payments current for as long as they can," says Doug Hoyes. "For someone dealing with significant unsecured debt, they need a more robust debt solution. The earlier they speak to a professional like a Licensed Insolvency Trustee, the more options they have available to get those debts under control."
About Hoyes, Michalos & Associates, Inc.
Hoyes, Michalos & Associates Inc., a Licensed Insolvency Trustee firm co-founded by Doug Hoyes and Ted Michalos in 1999, has established itself as the leading voice on personal debt issues in Ontario. Hoyes Michalos provides real debt management solutions to help Ontarians climb out of debt, including consumer proposals and personal bankruptcy, with offices throughout Ontario. Further information is available at www.hoyes.com
SOURCE Hoyes, Michalos & Associates Inc.