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What You Need to Know Before Taking Out a Payday Loan
April 15th, 2019 by Brian Doyle
46% of Canadians are $200 away from not being able to pay their bills, according to a recent segment by Global News. Additionally, 31% do not make enough money to cover their monthly bills and debt payments.
With so many Canadians so close to losing control of their finances, it’s no surprise that short term payday loans have become a popular choice for consumers who find themselves in need of emergency funds.
For consumers that are having trouble making ends meet, a payday loan seems like a quick and easy solution. Payday loans usually are less than $1500.00 and are considered short-term loans – you have until your next payday to pay them back. They are available online or in-store and you only need to provide proof of income for 3 months, an address, and a bank account to receive the loan and take payments.
Most people take out payday loans as their last resort. With no emergency funds, many times their credit is too damaged to access a conventional loan or line of credit through a traditional bank. For most Canadians that are already living paycheque to paycheque a payday loan is the beginning of the end.
The Beginning of the End
Payday lenders prey on people who can’t pay their debts, typically charging around $15 for every $100 they borrow in Ontario. Many people assume that this is equal to the average annual credit card rate of 15% but it’s actually closer to 390% in interest when calculated on an annual basis. There are also fees for non-payment; if the payday lender cannot withdraw the repayment from your account you are hit with late fees as well as charges from your bank.
Spiraling out of Control
With so many Canadians not prepared for a financial emergency, it’s no surprise that 40% of insolvencies include multiple payday loans. Typically a payday loan is used as a last resort because consumers have no other options but once they take on a payday loan they continue to struggle with making payments, perpetuating a cycle of debt.
80% of people that use payday loans roll them over, racking up additional loans and exorbitant fees with each new loan. Taking out additional payday loans to try to catch up, borrowers become further indebted and many eventually are forced into a formal insolvency proceeding.
What Are Your Alternatives?
1. Speak to your lenders
If you’re facing a cash shortage due to an emergency, call your lenders to see if they are willing to extend your timeline for payments.
2. Sell Some Things
Online marketplaces like Kijiji and Facebook are an easy way to offer items for sale and drum up some quick cash.
3. Ask for a Pay Advance From Your Employer
Ask your employer if they will provide you with an advance on your next paycheque.
4. Cash in Vacation Days
If you have available vacation days ask your employer if you can cash them in.
5. Ask for Help
Admitting you need help is hard to do, but it’s sometimes worth the short term embarrassment if it means avoiding a financial disaster.
- Friends and Family
If you have friends or family that could lend you some funds, it’ a better often option than going with a payday loan.
- Social Services
211 Ontario has a list of over 500 social assistance organizations that help with emergency financial assistance, sorted by location. Accessing a food bank is another option; allowing you to utilize funds normally spent on groceries.
- Doyle Salewski Inc.
Chances are if you’re considering a payday loan you are already experiencing financial difficulty and debt stress. Doyle Salewski offers a free, no-obligation consultation to help you evaluate your options for debt management. We’ll sit down with you and examine your personal financial situation, examining options.
If you are unable to meet your financial obligations you may be eligible for a consumer proposal where you make one low monthly payment with no interest to your creditors. Our success rate in helping individuals like yourself overcome their debt struggles speaks for itself; we have been successful in over 90% of the cases we have taken on. We are compassionate, understanding, and will provide you with unbiased advice so you can make the best decision for your future. And we offer a free comprehensive introductory financial analysis and consultation so we can come to the table with ideas the moment you retain us.
Looking to make a fresh financial start in Ontario & Quebec, Book Your Free Financial Analysis & Consultation.