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Payday Loans, Inc.: Short on Credit, Long on Debt dispels the notion that a payday loan is a short-term debt. Although marketed and advertised as a quick solution to an occasional financial shortfall, the actual experience of payday loan borrowers reveals there is nothing quick about the loan except its small principal. According to new CRL research that tracked about 11,000 payday borrowers over two years, many borrowers remained indebted for the 24 months that followed their initial loan.

As payday's crippling cycle of debt lengthens, borrowers who continue to use payday loans tend to borrow larger amounts with increasing frequency over time and become increasingly at risk of default. Data suggests that the typical $300 for an initial payday loan increases to $466 over time. The average payday borrower remains in debt for more than half of a year – double the length of indebtedness recommended by the Federal Deposit Insurance Corporation. According to FDIC, no borrower should be in debt on a payday loan longer than 90 days in any 12 month period.

At the time of a payday loan application, no assessment by the lender is made to determine the borrower's ability to repay. Secondly, as the lender takes the full amount of the loan from the borrower's next paycheck, little is left for borrowers to manage daily living expenses. So the payday debt cycle continues.

In the first year of taking out a loan, the average borrower was in debt for 212 days. Over the full two-year study period, the average length of borrower indebtedness grew to 372 days and nearly half or 44 percent of borrowers defaulted on loans.

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