The Payday Loan I Took to Fix My Car and the Debt Spiral That Followed
It was a Tuesday in March, and my transmission had just died on I-285 at 7:15 AM. I was on my way to work — I am a warehouse supervisor in Atlanta, and I cannot miss shifts because if I miss three, I am fired. The tow truck cost $180. The mechanic quoted $2,400 for a rebuilt transmission. I had $340 in my checking account. Payday was Friday. And I needed my car.
I walked into the payday loan store on Peachtree Industrial Boulevard at 11:30 AM. It was between a check-cashing place and a liquor store. The sign said "Fast Cash — No Credit Check." The woman behind the counter smiled like she had been expecting me. She probably had. I was not the first person to walk in there with a broken car and a checking account that could not cover a transmission.
I borrowed $1,500. The fee was $225 — 15% of the loan amount. The APR was 391%. I did not care. I needed the car. I needed the job. And I told myself I would pay it back on Friday when I got paid. One week. One fee. One problem solved.
I was wrong.
Friday came. I got paid. My check was $1,180 after taxes. I owed $1,725 to the payday loan store. I had $340 left in my account from before. That gave me $1,520. I was $205 short. I could not pay the full amount. So I did what the payday loan store wanted me to do: I paid the $225 fee and rolled over the $1,500 principal for another two weeks.
Now I owed $1,725 in two weeks. And I had $1,295 in my account. And my rent — $950 — was due on Monday. And my car insurance — $180 — was due on Wednesday. And my phone bill — $85 — was due on Friday. I did the math. I had $1,295. Rent was $950. Insurance was $180. Phone was $85. That left $80. Eighty dollars for two weeks of gas, food, and whatever else came up. And I still owed $1,725 to the payday loan store.
I rolled it over again. Another $225 fee. Now I had paid $450 in fees. And I still owed $1,500. I had not reduced the principal by a single dollar. I was in a debt spiral. And I did not know how to get out.
I rolled it over four more times. Six weeks. Six fees. $1,350 in fees. I had paid $1,350 to borrow $1,500. And I still owed $1,500. The total cost of the loan was now $2,850. For a $1,500 loan. That is 190% of the principal. That is not a loan. That is a trap.
By week seven, I was desperate. I was eating ramen for dinner. I was skipping breakfast. I was walking to work when I could not afford gas. I was avoiding my mother's calls because I could not bear to tell her what I had done. I was 32 years old, making $42,000 a year, and I was one missed paycheck away from eviction.
I found a way out. Not a good way. A hard way. I sold my car. The one with the new transmission. I sold it for $4,200. I paid off the payday loan — $1,725. I paid my rent — $950. I paid my bills — $265. I had $1,260 left. I bought a used bicycle for $200. I started biking to work. It took 45 minutes each way. I lost 15 pounds. I saved $300 a month on gas, insurance, and car payments. And I swore I would never take another payday loan.
I tell this story to everyone who will listen. I tell them about the $225 fee. I tell them about the 391% APR. I tell them about the six rollovers. I tell them about the $1,350 in fees. I tell them about the ramen. I tell them about the bicycle. And I tell them that payday loans are not a solution. They are a trap. And the trap is designed to keep you in debt, not to help you out of it.
I saved $3,000 over the next year. I bought a used car — a 2012 Honda Civic for $5,500. I paid cash. No loan. No interest. No fees. And I kept the bicycle. I still bike to work three days a week. I am healthier. I am wealthier. And I am free.
The payday loan store is still on Peachtree Industrial Boulevard. The sign still says "Fast Cash — No Credit Check." And people still walk in there with broken cars and empty checking accounts. I see them sometimes when I bike past. I want to stop them. I want to tell them what I know. I want to save them from the spiral. But I cannot. All I can do is tell my story. And hope someone hears it before they sign.
— Marcus, from Atlanta, where the bicycles are reliable and the payday loans are finally avoided.
