Have you ever had to give 25% of your paycheck to a payday loan company because times were tight? If so, read on to find out how you can get some of that money back.
Payday Loans
I was recently contacted by a payday loan company and offered $50 for mentioning them in a post. I’ve never gotten a payday loan and hopefully will never be in a situation where I have to. I knew so little about these loans I read up on them on Wikipedia and Get Rich Slowly to get the details on how they work.
Basically they serve as a way to “bridge the borrower’s cash flow gap between paydays”. The payday loan company gives the borrower money in return for an obligation to pay it back with their next paycheck, with 15-25% interest. We all work hard for our money and it’s a shame to give up 25% of it to a payday company but I guess sometimes desperate times call for desperate measures.
Payback Time for High Interest Lenders
I’m using this offer as an opportunity to give back to anyone that has ever needed to use any type of high-interest credit to make ends meet. Leave a comment about what you went through. I’ll randomly select one of your stories and send you the $50 I’m paid by the payday loan company.
The only catch is that you have to use the $50 as seed money for an emergency fund and commit to putting away a little every month. Hopefully, this will help you get through your next rough patch without having to borrow. I have no way of verifying your story or that you’ll actually use the money as intended so please be honest.
I’ll be accepting comments through 2/28 and will announce the winner on 3/1. I’ll send the money to the winner with PayPal. Good luck!
Thanks to JD over at Get Rich Slowly for letting his readers know about the contest. I’m going to extend the deadline for coments through 3/5 to allow them to participate as well.
Related Link: 0% Balance Transfer Offers give opportunities to lower monthly payments.
Written on February 23, 2007
Clever clever!
Comment by jim — February 23, 2007 @ 3:46 pm
Get money from the devil to fight it.
I heard payday loans are prohibited in some states.
Comment by yan — February 23, 2007 @ 6:30 pm
Good post, I have linked to it from my site, hope someone has a good story, because these pay day loans places are under close scrutiny right now here in Canada.
Comment by Big Cajun Man — February 24, 2007 @ 6:37 am
I think that the demographic that reads your site is not the demographic that uses those types of loans; I was hoping to click through and see some stories already!
I have never used one, but I walked into a pay day loan store once when I was living in Florida. It was a shady operation; my gut feeling is that the back room was being used to sell drugs and that the pay day loan place was just a profitable way to launder money. I have no idea if that is true or not, but it sure seemed that way at the time.
Comment by Blaine Moore (First Time Home Owner) — February 26, 2007 @ 12:46 pm
I’ve used one in Florida…..right after hurricane “Charley” came through and wrecked my house. I needed
the fast cash to do some immediate repairs, but ended up in a cycle due to the high interest and payed them over and over again until I could catch up a year later.
The interest was just below 25% and you had to pay on time or you stood a chance of not getting another one or paying more.
Comment by Charles Rady — February 26, 2007 @ 3:30 pm
Big Cajun Man, thanks for letting your readers know about it.
Charles, sorry to hear about your house, I’m glad you finally got the payday loan paid off. Thanks for sharing your story!
Comment by moneysmartz — February 27, 2007 @ 7:44 pm
[…] Money Smart Life » Payback Time for Payday Loans – Share Your Story and win $50 Ben is taking $50 from a Payday loan advertiser and giving it to a commenter who has lost money to high interest borrowing in the past. Sneaky. DEADLINE IS TODAY. (tags: pfblogs contests) […]
Pingback by links for 2007-02-28 ∞ Get Rich Slowly — February 28, 2007 @ 2:20 am
Wow, this is a great idea! Modern day Robin Hood of sorts
Neat!
Comment by ispf — March 2, 2007 @ 11:59 am
I’ve heard about it, but never use it and I don’t think I would like to use it at all.
Comment by Wisely Sunshine — March 2, 2007 @ 5:22 pm
I am currently trying to pay off a payday loan. It started in October 06 when I went to visit my mom down south. I ended up going out with my brother and his family to more places than originally planned (more $), went to the mall and bought some clothes because it was too hot to wear the ones I brought down with me, my mom needed a couple of things repaired in her apartment, she’s on a fixed income and I paid for them. When I got home and tallied everything up, I had less money than I thought. I spent more than I should have. I took out a $400 payday loan to ease the pain. The biweekly “interest” on a $400 loan is $88. So, you have to either pay $488 to pay the loan off completely or pay $88 interest to “roll over”. After that my car broke down and I had to roll over the loan a few times. Then it was Christmas and I had no money, so of course, I ADDED to the loan - another $400 to cover the shortage. Now the interest payments are $176 every two weeks. I can’t afford to pay down the loan because the interest payments are eating up all my available money.
I’ve been saving a bit of money every day for the last couple of months, 3 dollars a day exactly, as suggested by Brian Flemming’s blog - the Million Dollar Club. About 3 weeks ago I put in overtime at work. Between the overtime and part of my little savings pile, I paid down half the loan. Last pay period I paid down an additional $100 towards the loan. Next pay period I will be paying off the rest of the loan even if it means $25 left for groceries!
The interest rates for these things are too high! If you need the loan, you will not be able to pay it back. At least not until you roll it over a bunch of times and pay a huge amount of interest. I didn’t have any money put aside for savings before this, I didn’t save enough for my trip, and I didn’t plan ahead for an unexpected expense and for Christmas. It was my lack of planning that caused me to pay all these fees. HOWEVER, the loan companies charge a huge interest rate. These companies are rolling in huge profits. And they even make you sign a paper stating the clerk has told you how much you are approved for. I don’t remember exactly, but I was approved for almost $1000 loan. Much more than I could ever pay back with those types of rollover fees/interest.
I’m now saving every day. I wish I would have saved the $176 every two weeks towards an emergency fund instead. My outlook and discipline has definitely changed. I’ve discovered personal finance blogs as a result. But it was a costly experience. Sorry, long post…
Comment by Emm — March 3, 2007 @ 8:40 am
Emm, sorry to hear about your run-in with payday loans. However, if you discovered personal finance blogs as a result and have changed your outlook and discipline then maybe something good will come of it. Thanks for sharing, hopefully others will read and avoid making the same mistakes.
Comment by Ben — March 5, 2007 @ 12:06 am
[…] Blaine Moore (First Time Home Owner): The same legacy that they…Harrison: One of the reason I…Stephanie: Whoa, a fellow RITter in…frugal duchess: Thanks for the mention!…Ben: Emm, sorry to hear about… […]
Pingback by Money Smart Life » Payback Time for Payday Loans – Contest Winner — March 6, 2007 @ 11:22 pm
[…] MoneySmartLife was paid $50 to write about “payday” lenders and he wants to give that money away to a commenter who was once burned by accepting a payday loan. Tim from MyMoneyForest shares some thoughts on GuruWatch about Robert Kiyosaki’s latest column. Finally, J.D. from Get Rich Slowly writes about writing for money, the new way and the old way on Meta. […]
Pingback by Personal Finance and Investing Blog » Blog Archive » Weekly Blog Roundup, Week Off Edition — March 11, 2007 @ 4:50 pm
I just did my taxes but I have a pressig question which I can’t seem to find on the net. To make a long story short, I too got caught in the never-ending revolving door of money borrowing from pay day loans. I finally spoke up about this with my family and put an end to it. I want to know if all the interest I’ve been charged over the year can be used as an expense on my income taxes. If anyone knows, please let me know. I’d really appreciate it.
Comment by Anne — April 7, 2007 @ 5:25 pm
Anne, I don’t think the interest on a payday loan is tax deductible. If you itemize you can claim deductions for mortgage interest but I don’t think interest paid on other loans or credit cards can be used as a tax deduction for your personal income tax. If I’m wrong, please someone correct me.
Comment by Ben — April 8, 2007 @ 11:58 pm
I took out a $1,000 loan in 1999 from Citi Finance because my credit was not so good at the time. I only needed $500 for moving expenses but the minimum to borrow was a thousand. They issued the check at over 30% interest. The same day they gave me a check for $1,000, I wrote them a check for $500. The following month I paid off the balance. I believe this is where the term loan shark originated.
Comment by Susan — September 20, 2007 @ 2:45 pm
I had an old uncle who made a lot of money on short term loans. I think his rate was 25% per week. When I was a kid he was in prison, but got out when I was around 14. He had a box of index cards of loans that were outstanding from a decade before. Proceeding to collect on these as far as possible, he was soon reestablished. He rented a house, but had all of the modern appliances of the time (1950s) and a big Buick Roadmaster with a driver and bodyguard. As a bent over old man he would sit on a bench downtown and people would still go to him to get loans and make payments.
Comment by Macinac — January 6, 2008 @ 11:28 am
We had to take out almost $2000 in payday loans after our youngest was ill with RSV. I had no paid leave left, so I went for almost 2 months without pay. Our credit was already poor so we couldn’t get a traditional loan. And thought a payday loan would work out, b/c it was better than the bank foreclosing on our home. Well, we’re still playing catch up with these loans, and it hurts watching 1/2 of our paychecks go towards paying these off. We were able to catch up on bills, except for these loans and have definitely learned never to get one again.
Comment by Jessica — January 16, 2008 @ 2:03 pm