Cost of Offering Payday Loans

Ernst & Young Examines Cost of Offering Payday Loans; Finds it Costs $13.89 to Offer a $100 Payday Advance

A September 2009 independent study by Ernst & Young analyzed financial information of 2,687 payday lending 27 percent of multiline industry locations.

Full results of the study
Review all study highlights (PDF)

Using the financial data collected, Ernst & Young’s analysis yielded the following results (all numbers are on a pre-tax basis):

Average fee revenue equaled $15.26 per $100 payday advance loan.
Average cost equaled $13.89 per $100 payday advance.
The cost per $100 loan includes a bad debt cost of $3.74 and operating costs of $9.41. The remainder of the costs reflects the cost of loan capital and supplementary capital.
On a pre-tax basis, the average profit equaled $1.37 per $100 loan issued. On an average payday advance of $379, providers realize an average pretax profit of $5.22.
The payday advance product is a core service line among the surveyed locations and it generated approximately 51 percent of their total revenue.

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