IN THE SHORT TERM – GETTING A PAYDAY LOAN

I’ve been telling everyone this lately but I’m not sure if I mentioned this to you. I probably did but regardless, I just got a new job. I was flown out to Calgary for training, put up at some moderately reasonable hotel and I have been learning the ropes ever since. The one thing that hasn’t happened yet with this new job is that I still have yet to get paid. My not having had an income for the last few months makes this somewhat problematic.

The truth of it is, I am going to get paid next Thursday. When that happens, I will try my hardest not to hit the shops but that’s not the point here. The point I’m trying to get at here is how I am going to make it from now until then without any money in the bank.

Have you ever heard of a payday loan? It sounds sketchy, I admit. I will also admit to never having applied for one so I cannot attest to the actual experience, which I’m sure varies from one institution to the next. Now, when I use the word, “institution”, please note that I am not referring to a bank. Chartered banks do not offer payday loans as short-term bailouts are not the least bit profitable to banks. If you want a payday loan, you will need to go to what I can only think to describe as a money store such as the following:

I call it a store because you are effectively buying money in addition to borrowing it. A payday loan ordinarily requires you to pay a certain fee just to get the loan. This fee is then added to the potentially exorbitant interest rate you would have to pay on the money borrowed. Combined, these amounts can get so high that they can almost be considered as criminal, which in Canada, is any lending that has an interest rate of over 60%.

Rates on payday loans are not as high as that but do range on average between 15% and 30%. Rates on a personal loan at a chartered bank are generally under 10%, in case you wanted to compare. From what I gathered in my online research, the way it works is you can apply for up to 50% of your regular net earnings for a two-week period. You provide a void cheque or a post-dated cheque for the amount of the loan plus applicable fees to the lender. Two weeks later, you return to pay the loan and if you don’t, the lender will either debit the account you provided or simply cash your cheque.

The interest may not look like much in the short term but it is definitely high and there are definitely alternatives to this approach. Overdraft protection on your bank account and cash advances from your credit cards both carry hefty interest rates and should not be used as frequent safety nets but will still come to less than a payday loan will. Other options are a little more humbling but, being the snob that I am, I would still sooner ask a family member for a short-term loan than walk into a money store. On that note, I need to call my mother.

Note about the author:

Joseph Belanger is a Toronto-based writer who blogs about film at www.blacksheepreviews.com