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Payday Loans Toronto
Compare and Save With Loans Canada
Written by Lisa Rennie
Best Payday Loans Toronto (Online) January 2021
Have you ever been in a financial crunch that put you in a position where you needed to come up with money quickly to cover a pressing expense? It might only require a few hundred dollars, but sometimes even that may be too much for some consumers.
In these cases, many consumers in Toronto may have found payday loans Toronto very helpful and convenient. But what are payday loans, and what are the potential drawbacks of such loan products?
Know your rights when it comes to payday loans! Read this.
What Are Payday Loans?
Basically, payday loans in Toronto are small loans that are made for no more than $1,500. Their repayment time frames are relatively short; usually, the full loan amount must be repaid by the borrower’s next paycheck in one lump sum. These types of loans usually come with high-interest rates compared to other loan types.
Check out this infographic all about the payday loan cycle.
What is the Payday Loan Cycle?
While taking out a payday loan in Toronto might make quick funds available almost immediately, they can put consumers in what’s known as the dreaded “payday loan cycle.”
This cycle basically starts and ends at the same place: in a position where you have to borrow more money.
With no other way to get your hands on the money, you take out a payday loan because of how fast you can get your hands on the cash and how easy it is to get approved.
But when your next paycheck arrives, you may find that you don’t have enough funds to cover the entire loan amount or you may have other obligations that need to be covered. Since payday loans in Toronto typically come with high fees and interest rates, you may not be able to afford to repay the payday loan. In fact, interest rates on payday loans are usually 500% or more.
As such, you may find that you have to take out another payday loan to cover the cost of the first one. The cycle continues if you continuously find that your subsequent paychecks don’t afford you with the finances to cover the full costs of your payday loans.
That’s why it’s so important for you to make sure you are fully capable of repaying your payday loan and its associated fees and interest rate charges before taking one out, and even then it’s always in your best interest to find another form of financing.
How Can You Break the Payday Loan Cycle?
To break the vicious cycle of payday loans, the first thing you need to do is stop taking out additional payday loans.
Rather than opting for another payday loan, consider other alternatives. For example, you may consider taking out another type of loan in Toronto that doesn’t necessarily come with such extremely high-interest rates that make payday loans so hard to pay off. For instance, there are various personal loans and installment loans that you may be able to qualify for that are far lower in interest rates while still providing you with the money you need.
You may also consider a debt relief service in Toronto that involves hiring debt settlement companies to negotiate with your creditors on your behalf to lower the overall amount that you owe. Alternatively, they may also be able to negotiate a lower interest rate to make your overall debt less expensive.
If you own a home, you may be able to use the equity in your home as a loan. Borrowing against the equity in your home can provide you with the funds you need at a much lower interest rate. As long as you have at least 20% equity in your home after taking out the loan amount and have fair credit, a home equity loan may be a viable option.
What Are the Warning Signs of Predatory Lenders in Toronto?
Not all payday lenders should be dealt with. Look out for the following warning signs of a predatory lender so you can steer clear of them:
They guarantee approval. Any lender in Toronto who basically doesn’t care about your finances and credit score and is still willing to loan you money on the spot could be predatory. Reputable lenders in Toronto will at least make some effort to make sure you’re able to repay the loan you’re taking out. Predatory lenders don’t actually care if you are able to repay the loan or not – they want you to continually take out loans so they can make more money off of you.
Vague terms and pricing. All loan terms should specify terms of repayment, interest, and other fees very clearly. If you have to go out of your way to find out what these are, this is a bad sign.
They’re aggressive. Any lender in Toronto who pressure you into signing a loan contract on the spot should be avoided.
What Credit Score is Needed to Secure a Payday Loan?
Payday lenders don’t look at the credit scores of applicants. Instead, payday lenders in Toronto only require that you have a job, an active bank account, and a valid address. Even scores well under 650 (which is typically required for traditional loans) are OK.
Interested in more information about credit scores? Click here.
When Might a Payday Loan Be a Good Choice?
Toronto borrowers should be wary about taking out a payday loan without carefully assessing their situation. Payday loans are rarely the right choice, but they may be something to consider if a serious situation arises in an emergency where someone is absolutely certain that they have the money to repay the payday loan in two weeks but may not have access to a credit card right away.
Do you know the true cost of a payday loan? Find out here.
When is a Payday Loan a Bad Idea?
Payday loans usually are not the best route to take and very rarely should they be considered. For instance, the following scenarios would make taking out a payday loan a bad idea:
- Your current monthly debt already uses up your monthly income
- You need extra money for something that’s not that important
- You don’t have a stable income
Payday Loans Vs. Personal Loans
There are significant differences between payday loans and personal loans, including the following:
Term. Payday loans in Toronto usually have to be paid back within two weeks, or when the next paycheck comes in. Personal loans usually have much longer terms, making them easier to pay off.
Payments. Payday loans are repaid in one lump sum, while personal loans are repaid in installments.
Interest rates. As mentioned earlier, payday loans come with extremely high-interest rates. If you have a decent credit score, you can get a personal loan at a relatively low rate, one that’s far lower than those that come with payday loans.
Are Payday Loans Right For You?
While payday loans in Toronto are certainly available for consumers who are strapped for cash and have an expense that needs to be covered, there are other loan products available that might make a better fit. Get in touch with Loans Canada today to find a more suitable loan product for your situation in Toronto.