Pay Day Loans

crankcall

crankcall

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So 1st , I've never used or needed one. I'm listening to a man interviewed on CTV news, he owns a small engine shop , needed some medical help and borrows $4500 from "pay day loans" , five yrs later he finds out he owes $3790 of the $4500. He pays $200 a month , $156 of which goes to interest on the loan. New gov't rules cap predatory interest at 35%, but older loans are not retroactivly adjusted and many are out there at almost 45% .
A. How stupid (desperate?) would you have to be
B, How terrible is this guy at running a small engine shop?
C. Who would sleep at night with a spiral like that

The loan , which was actually written as an unsecured lined of credit was sold to DirectLend who then sold it to AllianceFinance. What an industry .
 
crankcall said:
So 1st , I've never used or needed one. I'm listening to a man interviewed on CTV news, he owns a small engine shop , needed some medical help and borrows $4500 from "pay day loans" , five yrs later he finds out he owes $3790 of the $4500. He pays $200 a month , $156 of which goes to interest on the loan. New gov't rules cap predatory interest at 35%, but older loans are not retroactivly adjusted and many are out there at almost 45% .
A. How stupid (desperate?) would you have to be
B, How terrible is this guy at running a small engine shop?
C. Who would sleep at night with a spiral like that

The loan , which was actually written as an unsecured lined of credit was sold to DirectLend who then sold it to AllianceFinance. What an industry .
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Legal payday loan rate just got lowered to $14/100 for two weeks. If you roll a $100 loan through a year, you have paid $365 in fees. That has been lowered by the libs to save us as it used to be 15/100 for 390% APR. It's all talking points and very little actual consumer protection.
 
It's just legalized extortion. Just taking advantage of the most vulnerable.
It's just unfortunate that low income people can't get a loan or line of credit through more reasonable sources.
 
250R-ICE said:
It's just legalized extortion. Just taking advantage of the most vulnerable.
It's just unfortunate that low income people can't get a loan or line of credit through more reasonable sources.
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On the flip side, the failure to pay rate is astronomical. While >350% is too high imo, with >10% delinquency, realistically, the 35% rate may be reasonable as below that, no business has an incentive to lend.

The big issue is not enough money coming in compared to going out. Most need a financial intervention, not a loan. I think everyone I knew that used payday loans smoked/drank. Cut the vices for a few months and your future financial path is drastically altered. None were willing to do that.
 
Financial literacy is a skill and an aptitude, just like anything else. We all have our individual strengths and weaknesses.

I'd like to think I have a knack for finances.

Engine repair? Zero knacks for that particular skillset.

I probably get taken advantage of at most of the shops I take my car to.

"You need a new flux capacitor and we topped up your blinker fluid"
"Oh. Ok. Thanks!"

🤷‍♂️
 
Lightcycle said:
Financial literacy is a skill and an aptitude, just like anything else. We all have our individual strengths and weaknesses.

I'd like to think I have a knack for finances.

Engine repair? Zero knacks for that particular skillset.

I probably get taken advantage of at most of the shops I take my car to.

"You need a new flux capacitor and we topped up your blinker fluid"
"Oh. Ok. Thanks!"

🤷‍♂️
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As the original story supports, mechanical aptitude without financial aptitude hurts. Financial aptitude without mechanical aptitude works.
 
GreyGhost said:
As the original story supports, mechanical aptitude without financial aptitude hurts. Financial aptitude without mechanical aptitude works.
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Good point.

Most problems can be solved by throwing money at it.

giphy.webp
 
Lightcycle said:
Financial literacy is a skill and an aptitude, just like anything else.
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I don't buy it. Financial literacy is basically grade 6 math. If you make $100 you shouldn't spend $150.
 
timtune said:
I don't buy it. Financial literacy is basically grade 6 math. If you make $100 you shouldn't spend $150.
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And yet, from what little I remember of Grade 6, there were some students who were good at math, and some spectacularly bad at it.

If you don't believe math is an aptitude, not sure what your take on the above scenario is? That people have done the Grade 6 math and know full well they are sabotaging their finances, but still go ahead and do it?
 
timtune said:
I don't buy it. Financial literacy is basically grade 6 math. If you make $100 you shouldn't spend $150.
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Yes but if you’re desperate with a low credit score there aren't too many options and knowing what you’ll pay for a given loan amount after x months/years does take a bit of skill if you’re not explicitly told.

What we need is a kind of central advice system for people, especially the elderly. There’s lots of disparate groups that might do this but having a place to go to to ask “hey, is this my best choice?” would mean less people getting preyed upon.
 
JC99 said:
Yes but if you’re desperate with a low credit score there aren't too many options and knowing what you’ll pay for a given loan amount after x months/years does take a bit of skill if you’re not explicitly told.

What we need is a kind of central advice system for people, especially the elderly. There’s lots of disparate groups that might do this but having a place to go to to ask “hey, is this my best choice?” would mean less people getting preyed upon.
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There are plenty of organizations set up for financial counselling and debt relief.

Here's one for example:

www.creditcanada.com

Non-Profit Debt Consolidation & Credit Counselling | Credit Canada

Avoid bankruptcy, get debt relief and achieve financial wellness with Credit Canada non-profit debt consolidation, credit counselling and financial coaching.
www.creditcanada.com www.creditcanada.com

However, if you don't have the aptitude to search for FIs with the best lending rates for unsecured credit, chances are those are the exact same skills required to search out those counselling sites.

Just look at how many questions are on FB groups and Internet forums asking questions that can easily be answered by a 5-second Google/Reddit search.

GTAM is no exception.
 
timtune said:
A short course in school on how interest works and the effect of various rates should be mandatory in my mind.
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If you can't pass the course, you can't graduate high school and then what? Some governments have tried to pass laws to save people from themselves by limiting the time between payday loans (eg you can only get one every three months) but the borrowers just go to a bunch of different lenders to bypass the restriction. If loans were linked to a central database (like opiode prescriptions), I wonder what that would do do the industry? It's hard to find a reason to argue against it other than profitability would suffer or maybe they think borrowers would go back to unregulated loan sharks. The loan sharks may be preferable. You don't get to keep digging for years with no hope of ever escaping. Get behind, get a beatdown, learn that sucks and change paths.
 
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My dad had a saying , two kinds of people , those that understand compound interest and those that pay it .


Sent from my iPhone using GTAMotorcycle.com
 
So many variables as to why people get themselves into dire straits, financially.

- financial literacy: an inability or lack of training to understand math, interest rates and options available to them

- impulse control: inability to make a distinction between necessities and luxuries, inability to delay gratification, tendency towards financing depreciating assets.

- You can also make a case about the globalization of social media and influencers to generate demand for unhealthy spending habits. 30 years ago, you only had to keep up with the Joneses across the street in your little neighbourhood in Newmarket. Now you gotta keep up with the rich housewives of Manhattan and their cottages in the Hamptons.

- ever rising cost of living and stagnant wages. This one I don't buy into too much. There's an oft quoted stat that right now, the majority of Canadians are only $200 away from insolvency. However, if you dig a bit deeper, that stat has been quoted every single year for the last... well, forever. It doesn't matter how the economy is doing, a lot of people will always spend right up to their limit of their finances, rich or poor.

- But I think the most insidious factor is the sheer weight of the financial industry's efforts to prey upon the aforementioned using a wide variety of debt traps like Payday loans and Rent-To-Own schemes with large markups. Right now, the big one is Buy-Now-Pay-Later, like Klarna, Sezzle, etc. The industry is moving so fast that regulators can't keep up with all the new offerings and the different ways lending companies are finding to get around the rules.
 
JC99 said:
Yes but if you’re desperate with a low credit score there aren't too many options and knowing what you’ll pay for a given loan amount after x months/years does take a bit of skill if you’re not explicitly told.

What we need is a kind of central advice system for people, especially the elderly. There’s lots of disparate groups that might do this but having a place to go to to ask “hey, is this my best choice?” would mean less people getting preyed upon.
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There are also the functional illiterate and mentally challenged.

In Rain Man the character can do phenomenal calculations but has no sense of value. He'd pay $100 for a candy bar.

I know such an individual with the foresight of a fifteen year old.

Watching a war movie, he'll point out that a scene is wrong. It's supposed to be happening in 1943 but the airplane the guy is flying didn't have that particular gun until 1944.

He's a senior citizen and can legally sign contracts. One cost the family tens of thousands to break.

Then there's drugs permanently affecting the mind.

Payday loans are also the only place a lot of people can get cheques cashed. The person gets a job and a paycheck but the bank won't honour the cheque until it clears.
 
Lightcycle said:
There are plenty of organizations set up for financial counselling and debt relief.

Here's one for example:

www.creditcanada.com

Non-Profit Debt Consolidation & Credit Counselling | Credit Canada

Avoid bankruptcy, get debt relief and achieve financial wellness with Credit Canada non-profit debt consolidation, credit counselling and financial coaching.
www.creditcanada.com www.creditcanada.com

However, if you don't have the aptitude to search for FIs with the best lending rates for unsecured credit, chances are those are the exact same skills required to search out those counselling sites.

Just look at how many questions are on FB groups and Internet forums asking questions that can easily be answered by a 5-second Google/Reddit search.

GTAM is no exception.
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That’s kind of what I mean. In the UK there is the Citizens Advice Bureau which is a centralized agency that advises on any number of topics and those that aren’t internet savvy know it exists to use the phone with.

It would be good to have something like that even if all they do is triage the caller to the correct sub group/organization for help.

This guy in the original post that got into trouble might have been told that funds exist for medical assistance via X and Y without resorting to punishing interest on predatory loans for example.
 
I forgot to add one other thing. When you’re searching for credit relief issues and things like that it’s also not that uncommon to find other predatory companies that will encourage you to consolidate your multiple debts under their umbrella so that they now have access to the interest you were paying company A.
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