Avoid ‘PayDay Loan’ Hell

One of, if not the, biggest pet peeve of mine is the Payday Loan.

I live in Hamilton Ontario, and our city is the first in Canada to limit the number of these pop up loan sharks who feed on the desperation of our most vulnerable citizens. It’s a start, but barely. It. Makes. Me. Crazy.

You know the tactics: “$300 for $20,” “No credit record denied,” “Solve your money problems with a $1,500 loan today.” UGH!

The bottom line is, there is no way these bandaid solutions will help you. In fact, very quickly, they can make your life a living hell.

Without a deep-end math lesson here, let me throw a few numbers at you.

Let’s look at the $300 for $20 deal. It’s a 2-week loan. You go in, fill out some paperwork, give them your banking info, and walk out with $300 cash. Feels great. Easy peasy.

Two weeks later – at the end of the month – they have access to your bank, and promptly reclaim $320 from your account. This never feels good. Mostly because you likely can’t spare the extra $300 from your income, and will come up short again next month. Two weeks from now, you’ll be back borrowing another $300. Only this time, you don’t qualify for the New Customer Special, and it’ll cost you $50 for the loan.

Of course, if you can’t pay it back, they’ll roll the loan over into another two week loan, and charge you $50 on top of the $20 you already owe. Even if you’re able to pay back the loan a month later, you’ll be out almost $400. This gets ridiculous really fast. They just keep lending you the same $300 – money that, technically, you never pay back – and they keep collecting the $20-$50 from you every month. It’s actually better for them if you don’t pay it back.

If there was a way I could take $300 of my money, and invest it so that I make $50 a month off of it, I would sell my first child to come up with the cash.

(Okay, maybe not a kid, but seriously, I’d find the money!)

Over the course of a year, that’s a return of 200%!!!

A good investment planner will tell me that 5% is a solid return on the use of my money. 15% is stellar!

200% is black magic. Legally, 30% is considered Loan Sharking.

And the Payday Loan places get away with it because they call it an ‘administration fee,’ not ‘interest.’

If you’re already in to these guys, do everything in your power to pay them back. And never go near them again. Follow my budgeting and credit tips here on this blog to help get on track so that you don’t need to borrow.

Fact is, if you are in a position where you need to borrow from a Payday Loan outlet, you CANNOT AFFORD to borrow from a Payday Loan outlet.

This is probably the best advice I could ever give you. Ever.

Alex.

Are You Really Getting Value?

I ran into this article today and thought I’d pass it along:

4 Pricing Strategies That Increase Your Spending

As the Christmas shopping season revs up this week, consumers need to be aware of exactly what they’re buying and how much they’re paying for it. The bigwigs don’t need your money anywhere near as much as you do…

Watch and learn.

Watch and learn.

Stacey Brown.

Beware The Back To School Blues

Please, please, please tell me you’re not buying new stuff for your kids to go back to school. Please.

Our economy has quietly morphed from a consumer-driven model to one fueled by the big companies whose sole purpose is to make more and more money for their investors. They spend millions – billions – of dollars to convince us that we need what they’re selling. Watch tv for an hour and count how many commercials commiserate with us because we’re too fat, too old, our hair is the wrong colour, we need to get that girl, we need to get that guy, we don’t have enough money, we have too much money, we need to eat healthier, we need to treat ourselves…

You get the idea.

And so, with the end of August and back to school upon us, we’re now brainwashed into thinking our kids need a whole new wardrobe and all new school supplies for Tuesday. And if you and you children part of the tiny minority who are not yet sold on that concept, the kids at school will drive it home next week, while they’re all wearing $200 worth of new duds.

Our world has become nothing but a money grab. Mother’s Day, Valentines Day, New Years, Boxing Day – all created to woo the consumer – nay, guilt the consumer – into spending money to show someone something they could do for free and a hug.

And real holidays, Christmas, Easter, and the like – the banks all offer special seasonal loans to ‘help’ you get through them! What!!

Come on, people. Even if your kids need a few new things, wait two weeks. Watch the prices tumble through to the beginning of October. Your dollar will be worth two in four weeks, and your kids’ll be decked out in new sneakers while everyone else’s are starting to look a little ratty.

Save some money. Stretch your dollar. And don’t fall for their marketing. Buy it if you need it, but don’t think you need it just because they tell you you do!