Payback Time for Payday Loans – Share Your Story and win $50
February 23, 2007
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.
All posts by Ben Edwards
We started out with Payday Loans when we hit financial bottom when I lost my job. We had just moved with a larger mortgage, plus have 2 kids at home to feed. We now have 6 Payday Loans that are killing us. I’m laying awake at night worrying. We pay one off and it seems something else comes up. Id go without food and eat cereal to pay them off, but I have 2 teenage boys who eat all the time and I even bulk cook and freeze things for them. No junk food, pop etc. I home cook meals every night. It is such a hole to get in, and so frustrating when you cant get out. Our credit has hit rock bottom now. We have considered bankruptcy since some of our other bills have suffered now also. Ive heard you can file against Payday loans, but where will I get the money to file????
Anyone who is badly in debt from a Payday Loan needs to contact the lender. Work out payment arrangements. There is no reason at all that you should risk your home, or the welfare of your family to simply pay back a loan of any form, payday loan or not. Talking to the lender is a huge help, and typically even if they will not work with you a lawyer helping you to arrange payment plans is much cheaper than the interest that you would otherwise end up paying.
My wife and I have always used payday loans when we needed to get out of a bind. But about 18 months ago, we bought our first house. Our lender new it was almost over our head and it would be rough. They hit us with additional undisclosed costs at the end of escrow and we took out a cash call loan to pay it off. 2500@99.96%. Also out lender promised us they would refi us in 3 months.
3 months came and went and no luck on the refi. By 6 months we paid off the the cash call loan but needed to start doing pay day loans to make the mortgage. It started with 2, then 4, then 6, ect… each month we would pay them back and reloan going deeper and deeper into the hole essentially paying loans with new loans. By about 9 months we had about 15 loans between the 2 of us.
The fees alone, 45 bucks X 15 loans every 2 weeks, we were blowing roughly 1300 bucks a month just in fees. So in october, we skipped a mortgage payment to pay off all the loans it was roughly 4500 to pay off the 15 loans at 300 each. So we couldnt even pay them all off. So since october, we have been juggling our mortgage and 5 to 15 loans, basically skipping a mortgage payment or car payment to keep the total loans down to a mininum.
It would be nice to use the loan fees as a tax deduction. We get slammed in taxes!! No kids making decent money, but struggling with a large mortgage payment. We dont want a bailout, We just want to get refinanced like the lender originally promised.
My son was born and I did not have any savings I am currently owing about 2400 in loans there truly is no end to this cycle I barely start paying one off and I need a new one for something else… Although the ones on the web are much cheaper than the ones out on the street.
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.
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.
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.
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.
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.
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.
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…
I’ve heard about it, but never use it and I don’t think I would like to use it at all.
Wow, this is a great idea! Modern day Robin Hood of sorts 🙂 Neat!
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!
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.
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.
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.
Get money from the devil to fight it. 😉
I heard payday loans are prohibited in some states.
Clever clever!