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.
Things are getting worse as you can read in this report by Hoyes/Michalos about PayDay Loan impacts on insolvency.