Pay Advance Loans
Whether you did it as an act of desperation, or you were just dumber than a sack of hammers, your decision to go to a pay advance loan store is costing you big-time and you’re ready to do whatever it takes to get out.
The pay advance loan biz has been growing by leaps and bounds. In the past ten years, over 1,300 have opened in Canada. According to a story in the Toronto Star, more than 2 million Canadians are using pay advance loans, and they borrow more than $2 BILLION annually. Whazzup with that?
The pay advance loan people say they’re providing a service: helping people who can’t find help anywhere else. Really? Well, if they’re so interested in “helping” people, then what’s with the fees, the outrageous interest rates, and the never-ending cycle?
Since pay advance loans are offered by privately owned loan companies and cheque-cashing outlets, up until recently they haven’t been regulated by the government. Hey, there’s even an outlet located in the federal Department of Finance building in Ottawa.
Interest is charged from the day you take the loan until the loan, and all the fees, are repaid in full. Payday lenders are supposedly not allowed to charge more than 60% interest on a loan, and according to the government, that’s supposed to include everything from administration fees, to convenience and/or verification fees, broker’s fees, collection fees, early repayment fees, set-up fees, loan repayment fees, rollover or renewal fees, and extension fees. OMG!
Of course, while they’ve been taken to court for charging more than the allowable 60%, they’re still doing it. I’ve seen people paying anywhere from 700-1,000% when all the fees are accounted for. Really! This became so much of a thorny issue that the Federal government didn’t want to have to deal with, so they made it a provincial issue, and provinces are still trying to figure out what to do.
Several provinces have stepped up to the plate including the Ontario government, which introduced legislation to cap how much companies could charge and ban practices like issuing concurrent and back-to-back loans. But, hey, since we’ve had a usury rule that’s been widely ignored by the pay advance industry for quite some time now, I think it’s going to take more than new legislation to make these people stop sucking the blood of the most desperate borrowers.
So what do YOU do if you’re in the cycle and are desperate to get out? You’re going to have to suck it up and either:
- be short for a couple of weeks, while you repay the loan and DON’T borrow again, or
- find a way to make more money so you can get the life-sucking debt off your back
There ain’t no other way kids. You’ve just got to get serious about getting out of debt and do WHATEVER IT TAKES to break the desperate cycle of borrowing and then borrowing again to make up for the cash flow shortage caused by the outrageous interest and fees charged.
It’ll be hard. It’ll hurt. But, hopefully, you’ll have learned an important lesson, and you won’t do that again.
April 21st, 2008 at 12:55 pm
Thank God that I haven’t ever had to go to a Pay Day Advance Loan. Phew!
April 21st, 2008 at 1:38 pm
I live on a major stretch of highway in my city and there are 3 payday loan places within walking distance of my home. I have never used one, and never intend to do so.
I don’t know anyone who uses these places, but I don’t think they are used for true emergencies, say your kid gets wacked in the mouth and need dental surgery and you have no health benefits to cover the expense. I believe people are overextending their pay. For most people, your paycheque is the same amount each pay period, unless something changes in what determines your paycheques, hours worked, CPP, EI rates change, stat holiday pay etc. So for the most part you should know what your weekly or biweekly pay is and budget accordingly.
I think one of the reason people end up with the payday loans is the buy now, pay later. They don’t realize if they don’t have the cash to pay when the term is up, interest is accrued from day 1, provided that the term of the buy now, pay later is payment and interest free until it is due.
I also believe that payday loan places prey on the undereducated or underemployed who tend not to read or understand the fine print of these loans. I know they are to be in plain english, but how about increasing the size of the print. I personally think all documents that involve borrowing should be in plain english or french, and the print be large enough to read with having to fish out a magnifying glass. Case in point, flyer from KFC last week, i turned to the back just to see if there was a date for the flyer and such, in microscopic print it said if you placed your order by phone for delivery you would incur a order processing charge, this on top of the delivery charge. No statement as to what the order processing charge would be. And no I did not order KFC by phone!
April 21st, 2008 at 4:15 pm
I wonder, Gail, if you could add a note, next time you write something about this subject, that the same should go for people living constantly in their Overdraftl; especially for those where the Max overdraft limit is more than what the person is bringing in per pay (like my husband). I nagged him so much about getting a 2nd job that he finally managed hand out applicaitons… now we wait for a response. It seemed to take less time on the show…
April 22nd, 2008 at 10:15 am
I can remember a time when we only had $12 to make it through the week. Mind you, my pantry is always full so we weren’t going to starve. So we just sucked it up and rode it out. It’s so refreshing these days to see a much healthier balance before payday.
April 22nd, 2008 at 12:56 pm
Melanie…just to add some perspective..I applied for a promotion in early October 2007 and just this afternoon Im receiving my letter of offer (government job)! Patience is the key….if they want your husband…they’ll call!
Payday loans are evil and is akin to loan sharking which is illegal…to legitimize the business takes away the violence associated with the trade but it’s effects are the same…you can’t legalize everything and hope that people will steer clear of it, whether it be drugs, smokes, alcohol, gambling….the human nature is to consume consume consume. Capping the interest rates is a start…but if they’re truly going to be a loan..the let the loan accrue interest after a reasonable period of time…not the day after…that’s just dirty pool in my books.
Nowadays there is no need for such things anyways….use the jars…create a budget and take into account for life’s little bumps….medical, car, or others…..if you divide your personal emergency cash into these jars….you won’t feel the hiccups of life…..
April 22nd, 2008 at 6:03 pm
I remember taking a few cash advances (now payday loans) when I lived in Vancouver almost ten years ago. If I recall correctly it was only on two or three occasions, and each time I remember thinking to myself;
“Great! Now I’m broke next week, instead of today!”
Gail your advice is absolutely correct, someone stuck in the payday loan cycle has to suck it up, be broke for a pay period and snap out of it.
(Although as an aside, youtube has some great Gary Coleman commercials for payday loans, a posted 99.25% interest rate…YIKES!)