Study: Payday loans usually lead to 6 months of debt

March 31, 2011 5:41:30 PM PDT
Payday loans are sold as a short-term loan to get cash in an emergency. However, a new study says payday customers tend to get stuck with debt for far longer than intended.

Payday lenders charge triple-digit interest -- sometimes more than 400 percent -- for two-week advances on paychecks.

The study by the Center For Responsible Lending says borrowers get stuck in a cycle of taking out new loans to pay back old ones. As a result of taking out multiple loans, the study found, the average borrower stays in debt more than six months a year.