Short term borrowing is a major source of finance, economists say

The short term lending industry in the United States has become a significant source of finance for many Americans, a new paper suggests. Although it is often thought of as a "fringe" funding option, as the National Bureau of Economic Research (NBER) paper noted, nearly a quarter of American consumers have taken out some type of short term loan in the last five years.

More importantly, it appears that short term lenders may play a bigger role in American borrowing behavior in the future, as 34 percent of people between the ages of 18 and 34 have taken out short term loans.

The source also stated that it is relatively commonplace for middle-class and educated individuals to seek these loans. More than 10 percent of Americans that make more than $75,000 per year responded to an NBER survey saying they have taken out short term loans and 25 percent of people with some college education have used this emerging borrowing strategy.

Although one in four Americans utilize short term lending options, there is room for even more development for the industry. According to the Community Financial Services Association of America, just 32 states allow short term borrowing. However, the source noted that the industry is actively attempting to achieve regulatory status in all 50 states.