More Mainers turning to payday and other costly loans
A growing number of Mainers are relying on alternative credit programs that can leave low-income households with more debt.
The Portland Press Herald reported that 7.5% of Maine households used pawnshop loans, rent-to-own contracts and payday loans from July 2010 to June 2011, according to an analysis by the Federal Reserve Bank of Boston. The figure is higher than New England’s 3.9% average and the country’s 6% average.
The services can leave Mainers with paying up to 300% in annual interest rates, though proponents said they are beneficial because they can help low-income households, especially when more traditional financing options are off the table.
Gregory Mills, author of the Boston Fed’s report, told the Press Herald that Maine’s higher percentage of alternative credit use can largely be attributed to the predominance of households with income between $15,000 and $30,000 per year.
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