When we last left off on my ongoing episodic saga, Why Debt Sucks, I was about to solve my problem of debt with yet more debt. (AKA Robbing Peter to Pay Paul). I had gotten even deeper into a bad debt situation thanks to bad relationship choices, which are always a bad idea whether or not debt is involved (ie, shacking up with somebody to save on rent and/or boost self-esteem, both of which I did a lot of in my 20s).
I was desperate for ready cash AND I was desperate to get some cash to live on between temp gigs in a terrible job market while trying to live while semi-employed in an expensive city with no support system. I walked into the pawnship-slash-payday-loan joint, and got buzzed into a scary-looking, jail-like place full of cameras and was greeted by a heavyset, greasy-looking guy named Bubba (seriously, that’s what it said on his nametag). The pawnbroker. He could easily have been cast as a mafia enforcer for one of the Godfather films, and for all I know, actually was a former or current mobster. (The payday loans he was there to sell had a 900% APR, which is way higher than mafia loan sharks charge).
Bubba buzzed me in, and asked how much cash I needed. I guess I looked desparate. The place technically was a pawnshop, with pawned items available for purchase, but I guess I didn’t look like someone who was in the market for a discount gold watch or electric guitar. I was someone who was there to, um, help supply the inventory, cheap.
I took the amethyst ring off my finger and pushed it through the little bulletproof glass slot. “How much can you give me for that?”
Bubba took the ring and inspected it with his jeweler’s loupe. “Pawn or sell?”
I wasn’t sure what this meant. “What’s the difference?”
“Sell means I give you money in exchange for the ring. This ring isn’t very good. I could give you twenty bucks for it, tops. But if you want to do a pawn loan with the ring as collateral, I could give you $100. And if you wanted to do a payday loan with the ring as collateral, I could give you $500. You make payments weekly.”
I was not a personal-finance reporter at this point in my life. Granted, I had once worked as an editor of stock reports in a brokerage house, but I’d been writing/editing stuff about the stock market, not loans. I didn’t understand APRs or the extremely dicey legalities of payday loans at gargantuan rates of interest. $500 for an on-the-spot loan sounded great to me. It even sounded too good to be true. (That’s because it was too good to be true. And weekly payday loans are now illegal in my state, for good reason. But they weren’t illegal in 2001, though the way that Bubba was willing to give me a secured payday loan without actually verifying my employment was pretty much, um, illegal at that time or any other.)
But at the time, I did not have the benefit of a strong interest in personal finance (which later served me as a reporter), or APRs, or even state usury laws. I did not have the benefit of hindsight. I was a desperate, indebted person in dire straits who was about to do something incredibly stupid.
I signed a bunch of papers that the pawnbroker put in front of me, along with a promise to bring him a copy of my ID for his records once I’d gotten my wallet out of Ex-Boyfriend-Locker-Outer-Loser’s apartment. (I kept that promise). What I didn’t realize at the time was, I just signed almost an entire year’s earnings away on a measly $500 loan.
How? That part comes later.
It only gets worse from here. (More to come, folks. Stay tuned).
Here’s the moral (I will be repeating this across multiple posts): Debt is a drug, just like cocaine. People get addicted to it. The only way to overcome an addiction is to decide that the pain of doing it is worse than the pain of stopping. Most people don’t get that far.