This is NOT Financial Responsibility

By Him from Make Love Not Debt

When I started grad school, I also decided to start being "financially responsible." See the quotes? That means that I had not idea what that actually entailed. I thought that the best way to start this new life was to take control of my debts. I owed a few hundred dollars to a friend and a few thousand dollars across multiple credit cards. The plan was to completely pay back the loan from my friend and to consolidate the debts I had on my credit cards by paying off the ones with low balances. Since I didn't actually have the money to do all of that, I decided to borrow more money!

Since I had an assistantship, I was paid a monthly stipend; therefore, I thought that I could easily pay back any loan. However, the assistantship paid only about $24,000 gross per year. It was the most money I ever made up until then. I thought I was untouchable. I then started getting the plan in action.

The university that I attended had a short-term program that was available to students. As a graduate student, I was allowed to borrow $1,000 without interest. Fantastic! I would get the maximum, repay what I needed to pay, and then pay back the loan, with no real cost to me. But things didn't work out that way.

When I received my first paycheck, I realized that after my monthly expenses were paid, I wouldn't be able to repay the interest-free loan in full. The interest rate on the loan would be a paltry 1.5% per month (18% APR) on the unpaid amount. I didn't want to pay that interest, so I looked for...another loan. A PAYDAY LOAN.

If you've never had a payday loan (all of you reading this?), it works like this: you present to them your latest paycheck stub so that they can determine the maximum amount that you can borrow. You write a check to them for the loan PLUS the service fee. After 14 days they cash the check. I ended up borrowing the maximum of $800 as that's what I needed to repay the university loan and get by for the rest of the month. The fee to borrow the money was $12 for a 14 day loan, which meant that the loan was AT A RATE OF 391% APR. And that's not the worst part.

After I got my payday loan, I walked out to my car. Of course the doors were locked. I reached into my pocket to get my car key, but it wasn't there. I patted down all of my pockets, but no keys. I ran back inside the payday loan shop and looked around. No keys. I asked the customer service person. No keys. I went back outside and looked into my car.

The key was in the ignition. I had locked myself out. In front of the payday loan shop.

I was deflated. I needed to call a locksmith, but the payday loan place didn't have a phone book (remember those? this was before even cell phones were popular). I sheepishly called my girlfriend (now wife, bless her heart) from the employee phone at the payday loan place so she could call a locksmith for me. She had been getting calls from bill collectors for the person who previously had her phone number, so I had to call three times to get her to answer (after she realized it was me on the phone - “why the hell are you calling me from a payday loan place?” - stupid caller ID) She called one out for me and drove to where I was to give me a good ribbing and some moral support. Probably the most disheartening thing was handing over $200 of my newly-loaned money to pay the locksmith. I was so ashamed of myself.

After all was said and done, I still ended up paying the university loan in installments. And since most of my next paycheck was going to repay my payday loan, I was back at square one - I had to use credit cards to get me through the next few months. In the end I did end up “achieving“ my goals of paying back my friend and consolidating my credit card debt, but at an enormous cost.

Today we’re credit card  debt free and have been since June 2007. Too bad I had to take such a humiliating route to get there.


Make Love, Not Debt is the relationship personal finance blog written by Him and Her, a young married couple living in Chicago. They blog about their relationship, working themselves out of debt, and what they do with the money they now get to keep!