Diving Deeper Into My Debt – Part 4: Payday Loans

Day 6| Paid: $0 | Remaining Debt: $63,117.27

Okay, here is where it gets stupid and embarrassing and idiotic. The Payday and Installment loans.

Here is a little tip for everyone out there: If you ever feel like you might need to get a payday loan – DON’T. Do everything in your power, literally everything, to avoid taking out these loans. They are predatory, and you can easily get yourself into a cycle of taking out one loan to pay another, and spiral downward quickly.

These loans aren’t the first that I have taken out, but they will be my last. I vow to never take another payday loan ever again.

I honestly don’t even know what I took them out for. I think the first time I took them out was in 2015 when I found myself unemployed for the first time. I didn’t want to lose my house or my car and I was too proud to ask for help from family.

Now, 6 years later, they are still haunting me. I find myself slightly short on cash one month, and boom I get a quick infusion of very expensive cash. It takes care of my immediate need, and then I pay out my ass on the backend.

This is why you need an emergency fund and some liquid assets, so that if you ever find that you have mismanaged your cashflow, or you are short one month, you can pull from these sources and avoid being ensnared by these loans.

Payday Loan 1: This is a short term loan that I stupidly took out about a month ago. It has a lump sum payment of $1062.50 due tomorrow, January 7th. I never even bothered to look at the contract when I took it out, but it has an APR of 651.79%. I originally borrowed $850 and will be paying $212.5 in interest. That is ridiculous. But I am the idiot that did it, and as sad as I am going to be tomorrow when I wake up and see the payment coming out of my bank account I will also be so thankful that this debt is gone. Fortunately I have generous family and a generous boss who all gifted me cash for Christmas. Every single dollar I was given is going towards this debt, plus a little bit of my paycheck from yesterday. Then I cut remove the chains from this loan from around my neck and focus on the next 3 that are weighing me down.

Payday Loan 2: I really don’t know why I needed this money. I took out this loan a few months ago, and looking back through my calendar I really don’t understand why I did it. I think I just got an offer for some instant cash and took it, damn the consequences. That was stupid.

Anyway right now I have a balance of $2632.55 with an interest rate of 206.48% and a biweekly payment of $243 (which I put down on the spreadsheet a few days back as $486 monthly just for simplicity sake). If I only pay the minimum required every two weeks I will have this paid off in July of 2024. That means paying $486 every month for a year and a half. Damn. I can’t do that, that is completely unsustainable and will ruin me financially for the foreseeable future. Because of that, after Payday 1 is paid off tomorrow, this loan has to be my Top Priority. Every single extra cent has to go to this loan so I can zero it out as quickly as possible.

Payday Loan 3: This one really saddens me. I remember when I first took out this loan almost 2 years ago. I was dating a women (different than my current girlfriend) and we had planned a weekend away. I ended up needing some maintenance on my vehicle and had some other unexpected expenses pop up in the two weeks before the trip. After those expenses I really couldn’t afford the weekend getaway, but in order to save face, I took out a $2000 loan. The trip didn’t cost nearly that much of course, and I used the balance to treat myself to some items that had been on my wishlist for a while.

The weekend getaway was nice enough, but 3 weeks later she and I broke up, and I had an extra $2000 in debt. I started to pay it off steadily, but I had no emergency fund saved up, so when an unexpected expense popped up about a year ago I refinanced the loan.

So here we are today, with a balance of $1854.64, an interest rate of 159.53%, and a weekly payment of $87.86 (which I put down as 351.44 per month in the chart above for simplicity). While the interest rate is massively lower than Payday 1, and even significantly lower than Payday 2, it is still an astronomical interest rate, and paying almost $88 a week is unsustainable, especially when combined with the $243 biweekly payments from Payday 2. Averaged out that is $209.36 a week going towards these loans…and I only bring home $712 a week. That leaves a tiny bit more than $500 for all my expenses, including all the other debts I reviewed over the past few days.

After Payday 2 is paid down I have to shift the focus on paying this debt down. The reality is I am drowning beneath these two loans. Once I have them paid off I think I will finally feel like I have broken the surface and can at least tread water. I will still have a long way to go until I reach shore, but at least I won’t be weighed down by these two massive anchors.

Installment Loan: The three payday loans I just went through are the worst of the worse. But the situation with this loan is really not much better. I took out this loan in 2015 when I was unemployed and had fallen behind in all of my payments. The original loan was for $7,800 and today my payoff balance is still $7779.45. Now this isn’t a payday loan, it is a legitimate personal loan from a bank, despite the relatively high interest rate of 35.94%. However they have been very flexible in letting me defer my payments whenever I have run into a tight spot. However that is also why 6 years later I have paid them thousands of dollars in payments, yet still owe almost exactly what I borrowed. However unlike the Payday loans I do not feel like this loan was predatory, and it truly saved me when I needed it. The only thing I am frustrated by is that, based on the original payoff schedule when the loan originated I should be making my final payment in February of this year. Of course I am nowhere near paying off this loan due to deferments, and they won’t update the payment schedule until after February. So I don’t have a clear timeline of when this loan would be paid off, assuming I continue to pay the minimum required each month. However I don’t plan on paying only the minimum each month – once all of the payday loans above are paid off this is the next debt on the list to get rid of. It isn’t weighing me down as much as the payday loans, and the interest rate is drastically lower than them, but it is still a loan that should already have been paid off, and I hate seeing those $281 leave my bank account each month. It will be nice to have that back once this loan is gone.

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