Direct Lender Payday Loans: Review

PayDay-Loans
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Part I

Payday loans were created for people who need money quickly.  Typically, their reasoning tells them, they are unable to wait for their next pay cheque.  A payday loan type of company allows this person to get fast, easy money, to cover off these situations, that they have identified as an emergency.

Definition

Some other names the payday loans can be called are payday advance, salary loan, payroll loan, salary loan, payroll loan, small dollar loan, short term and cash advance loan.

The definition of a payday advance is “a small short term unsecured loan, regardless of whether repayment of loans is linked to a borrower’s payday.  The loans are also sometimes referred to as cash advances, though that term can also refer to cash provided against a prearranged line of credit such as a credit card.  Payday advance loans rely on the consumer having a previous payroll and employment records.  Legislation regarding payroll loans varies widely between different countries, and in federal systems, between different provinces and states. [definition courtesy of Wikipedia]

 

This industry started in the mid 1990’s and has become one of the primary sources of lent money in Canada.  More and more Canadians are using payday lenders.

Payday advance companies rival the number of locations enjoyed by the likes of McDonalds, or the big financial institutions. And they continue to grow.  They  have expanded exponentially by offering services online.

Sample List of Direct Lenders

Some of the companies that are listed as payday lenders are:

Cashadvance.com      MoneyKey     MyPaydayLoan      CashNetUSA        Blue Trust Loans      Cash Central      MoneyLion      Net Credit          Capital Cash      Upstart       MaxLend      FastLoans       Check City       Loan By Phone       LoanSolo      1 Hour Loans      National Payday     PaydayLoan Today      LendUp      LendingClub      TMG Title Loans    Wizzcash     Check Into Cash

This is just a small example, there are many more.

Who Accesses Payday Loans?

The person who accesses a Payday Loan organization will have convinced themselves that the need for the borrowed money is greater than delaying the expenditure until they are able to pay for it out of their regular income. When they discuss the use of these companies, they are justifying this behaviour to both the listener and themselves.  Most of their “reasons” are better identified as excuses.  Some of them are as follows:

  • maxed out credit card
  • bank won’t give me a loan
  • using bank overdraft
  • car repair bills

All in all, they typically do not have enough money to cover their monthly expenses.  The chart below outlines some of these reasons:

Who?
Government of Canada

Another contributing factor is that many people do not understand what they are getting themselves into when they take out a payday loan.

The Government of Canada Payday Loans Market Trends states:

“Fewer than half (43%) understood that a payday loan is more expensive than available alternatives.  This suggests that many do not have sufficient knowledge to consistently make the borrowing decisions that best serve their financial well-being.”

How to Get a Payday Loan

One of the disguised problems of payroll loans, is the ease at which one is able to qualify.

Easy

Here are the basic steps needed to get a payday loan:

You can access a payday lender at one of their many storefronts, or you can apply online or by phone.

The application form consists of gathering your contact information and possibly some references.

Next, you write a cheque or pledge to  pay the amount borrowed by a predetermined date.

Now the lender is able to  add a finance charge or fee onto the total amount owed.

So, let’s say you are borrowing $100.  The lender will add a charge of $15.  You now owe him $115

You receive your $100 via bank deposit or he will give you a cheque.

When the predetermined date arrives, the lender will cash your cheque for $115.

The borrower has received $100 and has likely spent it on the unexpected expense that lead him to the payday lender, and he now is about to have a cheque of $115 cashed.

In most cases the borrower is not able to cover this cheque.

No problem!

The payday lender can offer him a “roll- over” feature.

This is where the lender will “roll” the first loan over to another term. And, you guessed it, he will add another fee, and this fee will be higher than the last time.

This is how the cycle of debt begins.  This cycle is very difficult to exit.

 

 

The problem begins with the ease of which someone can get into a payday loan. Their ability to be flexible makes them more appealing than banks.

They have more storefronts than banks, and they offer  longer hours, some are open 24 hours a day.

The payday lender will rarely check a persons credit rating.

And, the entire process takes very little time, usually completed within a half hour.

The ease at which the borrower can become involved in a payday loan is a key part of the problem

The Cost of Payday Loan Servicing

Getting the loan is relatively easy. Servicing the loan is another issue.

Interest will be charged on your loan from the day your loan starts, and continues to be charged until the loan and all the fees are paid back, in full.

In Canada, payday lenders are not allowed to charge more than 60% annual

Shark
Loan Shark

interest on a loan.  The fees and charges the lender attaches to the loan are considered a part of the interest.  There are so many various fees attached, that it does not take long to reach 60% annual interest.

Some of the fees charged are: administration, processing, convenience, verification, collection, brokers’ fee, early repayment fee, set up fee, cheques cashing fee, NSF, roll over, and liens.  And I am sure, I have missed some!.  The point is that the payday lender will “fee” you until you have no money left.

Below is a comparison of the cost of a payday loan to a credit card advance, an overdraft on a bank account, and borrowing a line of credit, provided by The Community Credit Union.

Cost-of-a-Payday-Loan
The Community Credit Union

 

Compare
The Community Credit Union

 

Compare-2
The Community Credit Union

 

 

A person signs a contract saying they have read stating that they understand all of the above, so it is difficult for a borrower to come back and dispute with the lender.

Cycle of Debt

Because of the roll over term and all the fees listed above, the borrower becomes unable to pay off the debt.  In effect, if they do not pay off the full amount in the beginning, the debt will grow at an astounding rate.  Most times the borrower is dumbfounded and fails to understand what has happened.  The results are devastating.

Lack of understanding the actual cost of borrowing, makes the initial payday loan seem like a walk in the park.  Until the first payment is due…..

 

Cycle-of-Debt
Loans Canada

Before he know it, the borrower has become  locked into a never ending cycle.  This financial burden, can end up being worse than the initial reason for borrowing.

Recommendations

There is no purpose in berating the person who has been caught in the payday cycle of debt.  There are ways to get out of the cycle, which will be covered in subsequent post.

It important to gain knowledge of an transaction before you sign a contract.  I have to believe that if they knew how much it was going to cost them, they would not have signed.  Perhaps a discussion with a trusted friend, before borrowing, would make them realize that there is nothing in the present moment that is worth the cost of a payday loan.  In my opinion, a payday loan is not worth the cost.

I Do NOT Recommend using Payday Loans

 

I do, however, believe in alternative, additional sources of income.  A person is wise to supplement their income, in whatever way that speaks to their passion and delights in life.

One way that I have found that keeps me intrigued is my career as an affiliate marketer. I was fortunate enough to have discovered a way to learn how to become an affiliate marketer through an online university offered by Wealthy Affiliate.

 

 

At Wealthy Affiliate, I learned how to set up a website, how to write a blog and how to connect it all together to create a residual income, to supplement my retirement.

As a former teacher, I was impressed with how the course work is laid out.  Everything flows in a methodical step by step manner.  You are able to work at your own pace, and there is plenty of support, both one on one, and communal.  The community is very close, and I have established friendships while learning.

Through the Wealthy Affiliate  University, I have learned the art of Affiliate Marketing, from the ground up.

One of the great things about Wealthy Affiliate is that it is free to start.  You can sign up for free, and test it out.  Once you completed the free start up, you can begin the lessons, to see if it is right for you.  some of the things you can expect find at Wealthy Affiliate:

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I highly recommend Wealthy Affiliate. To see my thoughts and opinions on this program, check out My Wealthy Affiliate Review.

 

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If you have any comments or questions I welcome them below.

 

Regards,Judy5

Judith

www.wealthyaffiliate.com

 

This post may contain affiliate links. Please read my disclosure for more info.

 

 

 

 

 

 

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12 thoughts on “Direct Lender Payday Loans: Review”

  1. It’s a tough old world financially these days and its sad to see so many fall into debt because of pay day loans, I personally think they should be outlawed or even harder to get just so people don’t get caught in that trap.
    Great job on educating us all 🙂

  2. Very helpful and beneficial information. I can see where people don’t understand what they are getting into. I believe that they are not taught how to handle money and make money decisions. What do you think?

    It’s a bad idea to borrow money through payday loans. However as you mentioned it’s easy money. If not paid in full after the initial loan the balance will grow at a very fast rate.

    It’s a downward spiral and the results are devastating. Thank you for sharing and bringing attention to this problem.

  3. This is a great review. It is so easy to fall into that cycle when people are not informed. It is a sad fact that more and more people can not make ends meet and I hope lots of people read this review.

  4. I was searching for loan to sort out my bills & debts, then i saw comments about blank ATM card that can be hacked to withdraw money from any ATM machines. I doubted thus but decided to give it a try by contacting there emailthey responded with their guidelines on how the card works. i’was assured that the card can withdraw $5000 instant & was credited with $500,000.00 so i requested for one & paid the purchasing fee to obtain the card. 72 hrs later, i was shock to see the DHL agent in my resident with a parcel{card} i signed and went back inside and confirmed the card works after the agent left. This is no doubts because i have the card & has made used of the card.

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