I met with someone in Vaughan the other day, I will him call Chris (not his real name). Chris unfortunately got into trouble with pay day loans. He was single and had a pretty good income, but with the high interest and administrative fees he was paying on these loans he was stuck, and he could not find a way to pay off the loans.
Chris made about $1,600 bi-weekly. However, he had about $40,000 in credit card debt. He had no trouble making the minimum payments on these debts, and in fact was able to pay more than the minimum payments. However Chris, like so many people I meet with, was one significant event away, from having a serious financial problem.
Chris’ vehicle broke down and he had to pay an expensive repair bill. He had enough room on one of his credit cards to charge the repairs to it. However, after using the majority of his pay cheque to pay his rent and car insurance, he soon found himself in a situation where he needed a little bit of cash to get him to his next pay. That is when he went to get a pay day loan.
He was able to get the $1,000 loan very easily. However when it was time to get his next pay they not only took the $1,000 he borrowed, but charged him over $200 interest and administrative fees for the two weeks he had borrowed the money. He did what many people did in his situation, he took another loan.
He was in this situation for a few months and soon, it was not just one pay day loan it was three. He was paying $1,200 a month in interest alone to these pay day loan companies. He was at a cross road. He was soon going to default on these loans and was already a payment behind on his credit cards.
After looking at Chris’ situation and going through his options, he decided a consumer proposal was his best option. He offered $400 a month over 4 years (48 months) for a total of $19,200. Although he owes $45,000 in total, his creditors will likely accept this proposal because it is more that they would get in a bankruptcy.
If you are having financial difficulties because of payday loans or are interested in finding out more about consumer proposals, please e-mail a consumer proposal administrator for a free, confidential consultation.