Predatory Lending: Not Even an Option

16
China Finance Online JRJC Stock News

We’ve all driven through run-down neighborhoods.  And we’ve all noticed the payday loan shops.  Until recently, I thought those companies swooped in because people in the area were going broke and needed a last resort.  But now I realize payday lenders aren’t coming to a poor community – they are creating a poor community.

Predatory Lending

Payday lending companies are commonly referred to as predatory lending companies.  It’s hard for me to tell you exactly what they are because they are always changing their practices to skirt the law.  Here’s how to spot them.  But honestly, just don’t go into a sketchy looking place to borrow money.  I don’t know if they will break your knees or put your feet in 2 paint cans full of concrete and throw you into the Hudson – but they are bad news.  I thought credit card companies charging 30% was ridiculous but many predatory lenders charge 300%!  They claim that 300% is APY so that’s not really a big deal.  They tell their victims they will only be borrowing the money until their next payday, so the money they pay on interest really won’t be that much.  But few people borrow only once.  They keep coming back.  And the high interest rates are there waiting with open arms.

I’m not a fan of a lot of financial service providers.  I’ve seen them take advantage of ignorant consumers.  That’s why I think everyone should fire their financial advisors in about 3 seconds. But predatory lending is the worst of any financial ‘service.’

Predatory lending should be avoided at all cost.  I’ll never take out a payday loan.  I’m too busy making sure my financial life is sound enough to never be tempted.  So instead of taking out a loan, these are the things I would encourage anyone to do instead:

1. Save

Payday lenders say they can do things like help you when your car break downs or pay for Christmas presents.  News flash!  Those things happen!  You need to keep a cash pile ready to pay for such occasions.  Not having money for Christmas presents is no excuse for taking out a loan.  I save a ton of my income.  It’s creating a barrier between me and an uncomfortable life where loans would be needed.

2. Work

Work more!  If you think you work a lot – think again.  Keep a journal of what you do with your entire day for a week.  Do you really work as many hours as you could?  I don’t.  So if I really need the money, I could work more.

If you’re even close to broke – work more!  Have some side hustles so money is flowing in more than just twice a month.  Think getting another job is hard?  Most of you reading this live in North America.  Making money in North America is easy.  If you ever think that’s not the case – would you rather try finding work in Africa?  Didn’t think so.  We have it good.

There’s always hope to create more money for yourself. Always.

3. Sell

Sell your stuff!  Before a payday loan I would sell dang near everything tied to my name!  Heck, I’d sell the nonessential parts of my car before I’d take out a loan at 300%!  Most people think a person needs a lot of stuff to live.  Not true at all.

The role predatory lending should play in your life

Right now I’m reading a book by Napoleon Hill called Think and Grow Rich.  Hill tells a story that has been stuck in the front of my mind…

“A long while ago, a great warrior faced a situation which made it necessary for him to make a decision which insured his success on the battlefield. He was about to send his armies against a powerful foe, whose men outnumbered his own. He loaded his soldiers into boats, sailed to the enemy’s country, unloaded soldiers and equipment, then gave the order to burn the ships that had carried them. Addressing the men before the first battle, he said, “You see the boats going up in smoke. That means that we cannot leave these shores unless we win! We now have no choice—we win—or we perish!”

What happened?

They Won.

Hill: “Every person who wins in any undertaking must be willing to burn his ships and cut all sources of retreat. Only by so doing can one be sure of maintaining that state of mind known as a burning desire to win, essential to success.”

In relation to predatory lending – I consider the shipped burned.  Taking out a loan with them is not even an option for me.  I have erased them from my mind.  I don’t leave them in the back of my mind thinking, “Just in case…”  I’ve said, “No!”  There’s no way on earth I will deal with one.  In my mind, all the predatory lenders are on a ship that’s sitting on the bottom of the ocean.  Courtesy of me and a matchbook.

So as much as I’ve loved telling you a bit about predatory lending – the important take away is to forget all of it.  Pretend they don’t even exist.  Sink them before they sink you.

 

 

-Will Lipovsky, FirstQuarterFinance.com

P.S. Sorry this post isn’t too funny!  So here’s a money joke for you…  What’s the cheapest kind of meat…?  Deer balls.  They’re under a buck!  Oh, the sophistication of my humor.

_

Image courtesy of Maersk

16 COMMENTS

  1. So many are not willing to part with their worldly treasures like a 52″ screen tv and expensive shoes. They won’t stop spending on stuff they can’t afford but then complain of the insane interest they are shelling out to deal with payday lending companies. They’d rather/have to live off of the financial grid (no access to a regular bank/credit cards etc) and pay more to cash their cheques and pay their bills. Some may be ignorant while others do know better and still go this route anyway – I’ve seen this firsthand with someone I know. This was never even a consideration for me – in fact I sold a lot of my own “treasures” in order to get out debt asap.

  2. I absolutely hate stuff like this! Why would you take advantage of someone else like that? Even if they fully consent to being ripped off, what about your ethics? Charging over 300%… Despicable!

    In Belgium there’s a lot of legislation to prevent this kind of stuff. I believe only officially recognized institutions can offer unsecured loans, which goes a long way to protect people against themselves.

    • It seems there’s no perfect amount of government intervening that can be done. People will always want more or less government. And there are a lot of business owners without a moral compass. So I think it’s best just to get accurate information out there so everyone can empower themselves. That’s where blogs come in. 🙂

  3. There are two of those leeches in my town right next to each other. Literally. I took a picture of it. Anyways I never even considered to see how much they actually charge, 300% is outrageous. It is kind of sad how people will resort to using them… may be better burning the ships… or eating the cheapest meat.

  4. I have witnessed people completely taken advantage of with these types of companies. It’s sad that they are still legal, even though the only reason they are is because they keep changing their practices for legal reasons.

  5. As a former victim of the payday loan trap, I can testify to the fact that it’s a horrible, horrible situation to be in. You’re absolutely right in that most customers rarely use the product once. You come in to pay your loan off on payday…but then have to turn around and take out the same loan again because who has that much extra money in their paycheck?? In no situation did I literally see myself throwing away money like I did the days I had to go into a payday loan branch. You’d go in, make a payment, take out the new loan and the net change was I just walked out of the store with about $70 less dollars. SUCKS Deer Balls!

  6. I worked for a financing company years ago in between a bank and credit union. I left after 45 days. Three weeks of which was training. I couldn’t live with myself seeing how people with really good credit 700+ would be stuck in a cycle of high interest personal loans and mortgages. They really preyed on the uninformed and our offices were mostly in urban areas (actually usually situated in the border of a wealthier town) to avoid CRA.

    • Good for you, Jason. I don’t understand how others can take advantage of people for a living. What kind of life is that?

      And since you left so quickly, congrats on actually costing the company money! 🙂

  7. I just shudder when I see the number that have popped up in my community.

    I’m reading Napoleon Hill’s book too, but truth be told, it’s a little dry, but I want to get through it.

    I knew you wouldn’t let me down. But theoretically shouldn’t they be buck balls?

    • Heya Debs,

      Most of the people I’ve talked to about that book have only made it part way through. I get it. But I have it on audio so that helps. I listen to it when I work out as well. Keeping active makes my brain for nodding off, ya know? I think the old-timey way he tells stories is what loses peoples attention in the 21st century. It’s a slower pace. I still def. recommend it though.

      Haha about not letting you down. I’m glad I didn’t! I barely saved it in the end.

      And technically it goes deer = either sex, doe = female, buck = male

      I grew up in the sticks. That’s my reference. 😀

LEAVE A REPLY

Please enter your comment!
Please enter your name here