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Borrowing money is a way of life for many people. Some can afford to pay off their debts in a reasonable amount of time, while many others will struggle. While no one carries more debt than Edmonton and the rest of Alberta, people across the country get loans for a variety of reasons.
10 questions you need to ask yourself before taking out a payday loan. Click here.
However, not all loans are created equal. Some loans are affordable and offer decent interest rates, while others offer exorbitant rates and shouldn’t be considered as an option unless absolutely necessary. An example of this type of financing is the payday loan. While not all payday loans are 100% bad, most consumers in Edmonton should be avoiding these type of loans unless they are in a serious situation and it is the only option available to them.
Before taking out a payday loan, it’s important to know your rights.
The main reason why payday loans are generally not the best idea is because of their high-interest rates. These high-interest rates can make it difficult to pay back these loans on time. This means people in Edmonton can often get stuck in what is called a payday loan cycle.
The cycle begins when you have a financial emergency and need money quickly. Because payday loans can get you the money you need very quickly, they are often the preferred choice for those consumers in Edmonton in a tight situation. Furthermore, they are easy to be approved for. However, because of the high-interest rates and fees, many people in Edmonton cannot pay back the loan in full, even after they receive their next paycheque.
As a result, you may need to take out a new payday loan to cover the old one, and this can sometimes continue for months and month causing serious debt problems. Thankfully, if you find yourself in the payday loan cycle, there are a few things you can do to escape it. These include:
Check out this infographic for more information about the payday loan cycle.
While there are times where payday loans are the only option for those in Edmonton, there are in fact many other alternative options in Edmonton that should always be considered first.
One of the best options is to simply go with an installment loan. These will have lower interest rates and have smaller payments spread out over a longer time, and thus are generally easier to manage.
Another option is to consider using a credit card. While this option isn’t significantly better, a credit card will definitely work fine in an emergency. Just keep in mind that you will be charged interest if you don’t pay off your full balance.
Also, if you own a home or your vehicle, you could consider a vehicle title loan or a home equity loan. While these are risky, they generally come with lower interest rates and you may even be able to qualify for a larger loan amount.
Learn more about borrowing with equity here.
While this may not be an option for everyone in Edmonton, borrowing from your friends or family can often work as well.
Of course, this doesn’t mean you should always avoid payday loans, it just means that there are generally better alternatives for more people.
While we mentioned not all payday loans are bad, it is good to be aware of the warning signs of one that is. Unfortunately, many predatory lenders and scammers will prey on those with limited options for financing (learn more about predatory payday lenders here). Falling victim to a predatory lender can cost you a lot of money and dig you into an even deeper hole than you are already in.
In an effort to help, here are the most common warning signs to look out for to help you spot a predatory lender from a mile away. Some of the warning signs of a loan scam or predatory loan include:
If you are ever uneasy about a lender or notice any of the above warning signs, it is best to steer clear of that lender. Trusting your gut is generally the right thing to do in this situation.
Do you know what the true cost of borrowing is? Find out here.
If you’ve been thinking about taking out a payday loan to help cover the cost of an unexpected expense, Loans Canada can help match you with a better alternative in Edmonton. Whether that’s an installment loan or a debt management solution, we have the options you need.
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