Robbie McCall's payday loan nightmare began nine years ago with a simple wish: to buy his teenage daughter a special Christmas gift.

McCall had started receiving social assistance after health problems forced him to leave his job. A payday loan for a few hundred dollars seemed like a good idea.

"It was so easy," he recalled.

But what McCall didn't fully understand was that the interest on his loan was being calculated biweekly, so every two weeks the amount he owed grew exponentially by 20 per cent.

That translates into an annual interest rate of 546 per cent.

Two months later he took out another payday loan, and dug himself an even deeper hole.

"The second time around, to borrow $200, I had to pay back $260," McCall said. Soon he was borrowing from one payday lender to pay back another.

'Almost impossible' to emerge from loan debt

After four years he had loans with four different payday lenders.

Ottawa's Montreal Road has 15 payday lenders along one short strip, just a few blocks from Robbie McCall's home. (Ashley Burke/CBC News) "I maxed out every one of them and I still had no money," said McCall.

"I didn't have any food in the fridge. I didn't want to have people over because I couldn't afford coffee."

It took McCall three years to pay off the initial $1,400 he had borrowed. In the end, he estimates he paid more than $10,000 in interest.

"Their interest rates are criminal," McCall said. "Once they get their hooks into you, it's almost impossible."

Alternative loan program

In January 2017 new rules came into effect in Ontario limiting payday lenders to charging $18 on every $100 borrowed.

And now an Ottawa social services agency has created an alternative payday loan to try and help people like McCall.

Doug Pawson is director of social finance at Causeway Work Centre, which began offering an alternative loan program in October 2016. (Ashley Burke/CBC Ottawa)

Causeway Work Centre launched its loan program in October 2016 with $100,000 from local credit unions.

It offers small loans at nine per cent interest to people who would usually have to rely on payday lenders with much higher rates.

"The need was far greater than we ever anticipated," said Doug Pawson, Causeway's director of social finance.

Over the past year Pawson said about 100 people have come looking for loans, typically for about $1,500, but only 13 have been approved.

"When we are looking at an individual's budget, we want to make sure our loan will help them get out of the cycle," said Pawson.

"If you put people in the position where they have too much debt, you can do more harm than good."

Robbie McCall estimates he's paid more than $10,000 in interest on four loans. (Ashley Burke/CBC News)

McCall said he was one of the people who applied for the Causeway loan, but who was not approved.

After years of budgeting McCall plans to make his last payment on his payday loans this week, and he vows to never use high-interest payday lenders again.

"I am college educated. I thought I knew what I was getting into," McCall said. "But it tumbled out of control so fast."