You may or may not be surprised to know that regardless of what profession or financial position, people from all different industries and backgrounds have the need to borrow money. The need to borrow money can stem from a lot of various reasons, such as unexpected events such as bills and repairs or the way we choose to deal with our finances.
Regardless of this fact that we know that everyone from time to time has the requirement to borrow money, and because of the many different loans and credit options available out there, we were wondering whether there was any pattern forming with the applicants of payday loans? Is there a typical payday loan customer? Alternatively, is there a profession or job industry that is more likely to acquire a payday loan? That’s why we wanted to ask, what does the typical payday loan customer work as?
Firstly, in order to understand who is taking payday loans and for what reasons, it makes sense to start by understanding the basics, what is a payday loan? How do they work? And what is their intended use?
What are Payday Loans?
Just in case you’re not entirely familiar with what a payday loan is, a payday loan is a convenient short-term financing option. The idea with payday loans is that the customer borrowers a small sum of money which is then repaid with the interest that was accrued on the loan within 30 days upon the customer’s next payday, hence where their name comes from.
Although 4 in 5 payday loans are repaid in just 30 days, 20% of payday loan borrowers are able to have their loan renewed or extended by lenders if they feel that they cannot repay on time and this is what is called a ‘rollover’. Rollovers generally will entail an increase of fees and interest every time your loan is renewed or extended; however, after the Financial Conduct Authority put the Consumer Credit Regulations into practice in 2014, this has ensured that lenders can only allow borrowers two rollovers per payday loan.
What are Payday Loans Used for?
All in all, payday loans are intended to be used in an emergency and one-off solution, as they aren’t explicitly designed to be used for prolonged or short-term use. Instead, these loans are intended to be used for things such as bills, repairs, unexpected expenses, or generally for supplementing a household’s annual income until their income comes in on their next payday.
This year, the price comparison site Finder conducted their own research into payday loans in an attempt to uncover who the average payday loan customer was back in 2017, and their findings found that the key demographic of their customers appeared to be:
- Between the ages of 25 to 30
- In employment
- Were tenants not homeowners
- From low-income households that were earning less than £1,500 per month retrospectively
Although Finder’s research was insightful, as not only did they include the key demographics of the average payday loan customer, but also contained information concerning what the typical payday loan that customers tend to take out was. From our data, we decided to conduct our own research into our payday loan customers to see whether we could identify a pattern in our payday loan applicants as to their profession, to see if we could see a familiar sequence emerging and theorise why that is, and this article documents our findings of that result.
What Did Our Research Find?
Our research concluded that, out of the thirteen different specific industry categories, the majority of our applicants worked in the Health industry. Which makes for a massive 47% of our applicants were able to choose the health industry out of all the available categories.
So Why Are Workers in the Health Industry More Likely to Get Payday loans?
In the UK we have free healthcare for a little over 70 years, since the Labour Government introduced it in 1948 just after the Second World War, called the National Health Service or as it is more commonly known by, the NHS. Today in 2018, the NHS employs around 1.5 million people in the UK.
According to the online job seeking website Indeed, salaries in the NHS can vary from just £17,047 per year for the role of a Service Technician to £66,732 a year for Oncologist, and there are many different job titles and salaries, which all in all makes it hard to work out an overall average for an NHS worker.
However, if we look at the average amount of income salary of a registered nurse, which coincidentally is one of the most common jobs in the NHS, they earn just over £25,000 per year, which is £2,000 under the national UK average of £27,000.
In 2017, the government made cuts to the student nurse bursaries, meaning that trainee nurses could no longer receive funding while they were studying. Meaning that since 2017 studying nurses now have to find ways to fund and support themselves without a bursary. This has led to a drop in the applications for student nurses, as many people cannot afford the luxury of being able to support themselves while studying, leaving around 40,000 nursing vacancies available in the UK with no trainee nurses being trained to fill those vacancies. Meaning that existing nurses are overworked due to being forced to work longer and harder hours to cover those vacancies and see that the amount of work is covered.
Now, after tax, the average registered nurse will earn around £20,380.88 a year, that’s £1,698.41. The average rent and mortgage in the UK costs a staggering £912 per household per month for rent and £736 per month for a mortgage, if you can afford to own your own home, meaning that after you’ve paid your rent or mortgage payment, nurses are likely to be left with £786.41 if they rent, and £962.41 if they’ve got a mortgage. The monthly food bill for a family of two comes to on average £320 - £400, Leaving them with around £466.41 - £386.41, or £642.41 - £562.41. If they have a car that’s an average payment of £162 per month or £280 for public transport, which leaves just a little over £100 to £200 left to any additional purchases or emergencies.
So while, higher positions in the NHS provide a wage which is higher than the national average, other positions and salaries that are below the national average may make it harder for families to make ends meet in the event of any unexpected bills or expenditure. Due to funding cuts to the NHS itself and cuts to student bursaries, the NHS has also found itself understaffed, meaning that more staff are working longer hours to ensure that that they fulfil the standards of work and cleanliness for the sake of their patients.
Although workers in the health industry are highly well renowned and regarded for all the work that they do, the wages leave a lot to be desired, with some being a lot below the national average in comparison to the work they do. However, this is expected to change due to the plans to increase NHS workers wages over the next 3 years, meaning that the least a NHS worker will be able to receive as a salary will be £18,005, which is still well below the national average but will be a significant improvement to those workers lives.
The real living wage, according to the Living Wage Foundation, which will cover the costs of living for adult is £10.55 in London and £9.00 across the rest of the UK, meaning that even with the intended pay rise, workers would still only be earning around £8.00 per hour, which is under the real living wage.
In the event that a health professionals car breaks down or boiler breaks and the likelihood will be that they won’t have the funds or resources to pay straight away, so their best choice for obtaining credit quickly and easily would be a payday loan. Seeing as most payday loan applications are now made online and take very little time to process, meaning that they are one of the most readily available and most accessible forms of credit available for busy professionals and probably why they are their choice of loan.