226-378-7748 joe@budgetboss.ca

Wednesday WTF: April 12, 2017

Pay Day Loans

Happy Hump Day friends! Today’s topic is about the ever popular payday loan. I have a staggering amount of people I know that use these services. Having dealt with absurd lending practices before in my lifetime I feel I can give a bit of a perspective on this. My post today will describe in detail why you should never use payday loan services and if you do, why you have to get out!

The payday loan industry has been around for over 20 years. In the United States, it generates over 9 BILLION dollars of revenue per year. In fact, there are more payday loan shops than Mcdonalds and Starbucks. That is pretty impressive when you think about it. The problem with Pay Day Loans is that they prey on the most disadvantaged people in society. You don’t see people making 100k+ a year using them. The people that use them are already living paycheque to paycheque, often on government assistance. They then get caught in the vicious cycle of using a payday loan, paying it off on their next payday, then borrowing again to make it to the next payday. Here is a terrifying example for you:

-Dave makes $800 every two weeks
-An emergency comes up and he needs $600 dollars to repair his car
-He takes out a Pay Day Loan for the $600 that he will take care of on his next pay
-A week later he gets paid and pays off the $600 plus $120 ($20 per hundred borrowed)
-Paying that $720 only leaves him with $80 till his next payday
-He then takes out another payday loan to get him through the next 2 weeks
-The cycle of debt has now begun

Payday loans are legalized loan-sharking. With interest rates sometimes over 900%, it is no wonder that people cannot escape the cycle. The government has tried putting in new laws that curtail their interest rates and predatory tactics but it has been a difficult struggle. They are like a chameleon that changes color every time a new law threatens their model. We are lucky enough to have great leaders like Mohamed Salih fighting to end their despicable tactics.

If you are caught in this cycle, you have to get out. If you are thinking about taking out a payday loan, DON’T!!! Find literally any other way to avoid it. I have attached a John Oliver clip about how terrible the industry is. Also a London Free Press Article about Mohamed Salih and his pursuit to regulate the Industry. Debt is gross so try your best to get out of the cycle. See you tomorrow for “Thursday Trim the Trash.”

“Home life ceases to be free and beautiful as soon as it is founded on borrowing and debt.” – Henrik Ibsen

http://www.lfpress.com/2015/09/20/coun-mo-salih-wants-city-hall-to-find-ways-to-regulate-the-payday-loan-industry-in-london

https://budgetboss.ca/551-2/

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Joseph James Francis is a Financial Advisor. You can find him on various social media platforms and at www.budgetboss.ca.

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