Ok - before you say it, I know payday loans are supposed to be used for emergency funding. I also know that irresponsible use of payday loans can put you in a cycle of debt. However, to the defense of payday lenders, irresponsible use of a credit card, bank loan, or any other financial product can spiral you into unforgiving sea of debt. Anyone remember the financial crisis of 2008? I don't remember payday lenders being the cause of that melt down. Anyway, I digress...
It started back in January. I had accepted a new job and was excited about the opportunity to advance my career and start a new life.
The whole move out process was extremely fast. I accepted the job on Monday morning. By Wednesday evening I had sold my condo. I was able to sell the condo to a friend who had always envied the place, and was coincidentally looking for a new pad. By Friday afternoon I found myself sitting on an airplane leaving from phoenix, AZ for Salt Lake City, UT. As the engines engaged for take-off, I thought about how scary it was to move into a new state with no friends, no house, and all my belongings waiting back in an AZ storage shed.
Once in Salt Lake City two thoughts crossed my mind. The first was the shock at how un-humanly cold it was outside. The second was questioning where I would sleep that night. The only feasible option was a $175 airport motel. I remember being nestled between the hard hotel mattress and the polyester blanket and thinking to myself "you got to find a place to live".
The sun rose upon a beautiful Saturday morning. Snow (which I hadn't seen in years) glistened amongst rows of parking lots and cheap eats. After browsing the net all morning, I found a condo near my work that was going for a really attractive price. It turns out the owner was in a similar situation as myself (moving because of a job opening); only he was trying to sell while I was looking to buy. The whole situation was set up for a quick sale and quick move in. Perfect.
I called the seller from the number listed on the website and agreed to meet him in his condo. After a 20 minute cab ride I was standing in front of one of the most beautiful condos I had ever seen. We exchanged pleasantries and he took me on a tour of the condo. I liked what I saw and was ready to buy. The apartment was advertised on the web for $74,900. Similar condos in the complex were selling for $125-150k. I knew the guy was looking to sell the place fast, and at a price like this, if I didn't take the offer someone else would.
I agreed to buy the condo. We printed out some documents from an online lawyer and got all the legal paper out of the way. Part of the agreement we struck was that I would pay the entirety of the apartment within 14 days. The money I had made from selling my condo in Phoenix would cover the cost. I also agreed to pay a $500 "quick transaction fee". This "fee" was the buyers attempt for me to essentially pay for his plane ticket to UT. At the deep discount I was getting, I didn't mind agreeing to the "fee". There was only one problem I didn't have $500 in cash.
I had spent most of my "on hand" cash on the hotel room and cab ride. Because it was a weekend, the funds from selling my condo in Phoenix wouldn't come in until next week.
I told the buyer that I didn't have $500 cash on hand but I would get it to him on Monday. The buyer dismissed that idea and suggested I take out a payday loan. I did the math in my head and financially it made a lot of sense.
Payday loan lenders typically charge a set amount per $100 borrowed. In my case the lender charged $20 per $100 borrowed. On a $500 loan the lender charged $100. Overall I owed the lender $600. The lender gave me two weeks to pay the loan back. This may seem a little steep, but circumstances can make the service charge of a payday lender look like peanuts. The condo that I was buying would retail for around $125k under normal circumstances. However, because the buyer needed to sell the condo in days not weeks, he drastically reduced the price of the condo to $74,900. The price between what the condo should have gone for and what the buyer was selling it for was $50,100. I would have lost this deal had I not agreed to the $500 "quick transaction fee". Factoring in the $500 "quick transaction fee" and the lenders $100 service charge I ended up paying $75,500 for the condo.
