Many Houstonians turning to payday loans to meet needs

Houstonians are using payday loans at dramatically higher rates than the rest of the country, largely to cover basic needs like food, rent, and utilities rather than discretionary spending.

How widespread is payday loan use in Houston?

• About 12% of surveyed Houston residents reported taking out a payday loan in the past year, compared with roughly 1.1% of U.S. adults nationally.​

• Roughly 19% of Houston-area residents used at least one high-cost lender (payday, pawn, auto title, or tax refund advance) in the past year, versus about 5% nationally for similar products.

• In Texas overall, about 7.5% of adults used a payday or auto title loan in 2019 and 4.7% in 2020, indicating Houston’s current usage is above even the state’s elevated baseline.​

Why are people turning to these loans?

• Nearly 60% of Houston borrowers reported using high-cost loans for food or groceries, and about half used them for rent, mortgage, or regular living expenses.

• Researchers emphasize these are mainly workers trying to “make themselves whole,” not people financing vacations or luxury goods.

• Stagnant wages, high housing costs, and limited savings mean many households lack a cushion for unexpected expenses, pushing them toward quick cash options.

Who is most affected?

• About 20% of Black respondents and 14% of Hispanic respondents in Houston reported using a payday loan in the past year, versus 5% of White and 4% of Asian respondents.​

• Usage is highest among adults aged 30–49, peaking at about 1 in 6, and among households earning under 50,000 dollars, where roughly 1 in 5 with incomes under 25,000 dollars used a payday loan.​

• Houston’s higher delinquency rates on personal and subprime loans suggest financial stress is concentrated among lower-income and subprime borrowers, who are more likely to end up in the payday market.​

Cost and debt cycle risks

• Texas payday lenders often charge annual percentage rates that exceed 500–600%, enabled by a “credit services organization” structure that sidesteps state interest rate caps.

• In 2024, Texas borrowers paid about 1.3 billion dollars in fees on payday loans—roughly equal to the total dollar amount borrowed and refinanced—showing how fees can rival principal.

• High fees and frequent refinancing make these loans “set up for failure,” with borrowers often paying back far more in interest and charges than they initially received.

Limits of regulation and available alternatives

• Houston has a local ordinance limiting certain refinancing practices and requiring partial principal pay-down, but enforcement is uneven and broader rules ultimately depend on state action.

• Texas offers minimal statewide rate caps, helping sustain a large storefront payday and auto title industry with more than 1,900 outlets statewide.

• Some nonprofits and mission-driven lenders (for example, Capital Good Fund, Fig Loans, and local CDFIs) offer lower-cost small-dollar loans and financial counseling as alternatives, but these options are still far smaller than the payday market.