As most of my regular readers know, I tend to get a twitch and rant loudly when talking about payday loans and the places that give out this “alternate credit vehicle” (a term used by the industry). I have pontificated about this point many times, but now Stats Canada has put out a study about the growth of this financial alternative, and also who uses it. Perspectives on Labour and Income (2015 last updated) examines this whole industry in detail, but Stats Canada has put up a good summary on their web site about it.
Three percent (3%) of families in Canada have admitted to using these kind of services in the past 3 years. The family’s main bread winner is typically between 35 and 44, which is also interesting (non baby boomers, more like Generation X’ers).
This quote makes me feel very sad:
Almost half of families who used payday loans reported that they had no one to turn to if they faced financial difficulty, significantly higher than for non-users (32%). More than one-quarter reported that they could not handle an unforeseen expenditure of $500, almost four times the rate for non-users. Nearly half could not handle one of $5,000 (17% for non-users).
Yikes, that really does mean we are living a little too close to the ragged edge these days and really need to think about how we spend our money.
I am not condemning you for using this service, but I do want you to think about how you can stop using these services. There are many different ideas out there on many different blogs and books you can get from your library, so please start a plan. Don’t feel like this is your only way to deal with this, because these Loan Sharks are not the answer to your financial survival, if anything they are the end of your survival, there is little chance of escape from these sharks. If you are paying 470% interest, your chances of getting out from under this is not likely.
Payday Loans, Rick Mercer ?
Things are getting worse as you can read in this report by Hoyes/Michalos about PayDay Loan impacts on insolvency.
A good comment from Facebook on this post “Jaws, the story of a lone shark. Pay Day Loans, the story of a loan shark.”
Years ago a friend of mine had 4 payday loans at 3 different outlets (when I met her). Same for her roommate. I helped her budget, and it took a while, but she was able to get out from under the financial devastation that was her life. At one point the company was putting in the demand for her money to the bank on the day BEFORE her disability government cheque hit the bank, which enptied her account before the rent was taken out, forcing her to go get another payday loan. How is that even legal?
She is now debt free, and living frugally as a senior, still working, but still debt free, and she will never go back to payday loan places!
Those places should be much more severely restricted!
How can these people who work at these places even sleep at night knowing the things they do?
I have no idea, nor do I want to know. I think I’d rather be a Pawn Broker than a pay day loan owner.
No disagreement, but that is a damning statement about the Banks and the Governments, that they allow this to happen. Access to financial services, without HUGE service charges is disgraceful in Canada. There needs to be a way for the poor and needy to be able to use banks in some fashion. Forcing them to use these services is criminal.
Where as I agree with you for the most part about PayDay loans, there is a certain sector of the population who uses them.
The very poor use these types of services because they get into a bad financial situation. It’s the only way they can survive sometimes.
With regards to their cheque cashing services, this is also very expensive.
Many welfare recipients don’t have bank accounts and use the cheque cashing service as an alternative to getting a bank account and paying service fees.