Short-term consumer loans have long been viewed as a fringe service, but the recent financial crisis proved that the middle class uses them, too. A new Urban Institute study found that 41% of American households reported using “alternative financial services” in 2011. That’s up from 36% in 2009, Time reports. Prepaid debit cards make up a fair portion of that growth, but some 14% of households reported using “nonbank credit.”
Nonbank credit includes payday loans, pawn shops, rent-to-own contracts and tax refund anticipation loans. It’s a sign that there’s a demonstrated need for the product. And that need has grown fastest among households earning over $75,000 a year, Time reports. Households earning between $50,000 and $75,000 were the second-fastest growing demographic while those who make $15,000 or less a year actually scaled back their use of nonbank credit.
The growth in nonbank transactions coincides with a reduction in access to credit. “Across all of these metrics (including new account originations and total credit lines), credit appears to be less available today than it was in 2007,” the CFPB reported recently. Short-term consumer loans fill that gap.