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Predatory lending practices are everywhere and can affect all consumers, no matter who you are or what your financial situation is. Predatory lenders are just that, predatory. They prey upon anyone and everyone looking for a loan. Their specialty is, of course, those is desperate financial situations, but it’s important that all consumers are weary of the lenders they choose to do business with.

What is Predatory Lending?

Predatory lending is when a lender enforces unfair, illegal, or unreasonable loan terms upon their borrowers (read more here). Predatory lenders might also try to force a borrower to accept these unreasonable terms or take on a loan that they cannot realistically afford. These lenders typically take advantage of people who are in desperate need of immediate money, have minimal financial knowledge, or live in low-income areas. These lenders can often be found amongst payday loan lenders. Predatory lenders think only of themselves and their profit margins.

How to Protect Yourself Against Predatory Lenders

The best way you can protect yourself against predatory lending is to be as informed as possible about your rights as a borrower as well as the common practices of these types of lenders. Predatory lending is not a new idea which means we have a pretty good idea of what to be on the lookout for and how we can defend ourselves against them. Here are the most common practices of predatory lenders.

Unsolicited Loan Offers

Legitimate lenders usually don’t go around asking consumers if they want a loan through the mail, online, or over the telephone, especially if they’ve never worked with you before.

Promise of Guaranteed Approval

If a lender straight out promises to approve you for the loan you want without asking for any type of risk assessment (credit check, income verification, etc.) it’s definitely too good to be true. Even lenders who work with credit constrained borrowers need some information about the financial standing of all potential borrowers. No one can guarantee approval for a loan.

Pushy Loan Agents

If the loan agent you’re working with seems a little too eager to get you to the sign on the dotted line quickly, there might be an alliterative motive behind their eagerness.

Excessive Fees

Predatory lenders often try to tack on extra costs to their loans in the form of fees and they often don’t make it very clear that they’re charging these fees. Always read your contract before you sign it and make sure you question anything you don’t understand or don’t feel is fair.

Documents with Blank Spaces

If a document that you’re supposed to sign has any blank spaces, do not sign it. A predator lender may add in additional information after you sign. This could lead to serious financial issues down the line.

Dealing With Predatory Loan Debt

Every year, hundreds of thousands of Canadians all across the country, fall victim to predatory lending practices. It’s an unfortunate fact, but there way several ways to deal with the debt that arises from predatory loans.

Credit Counselling

Before you make any decisions about stopping your payments, taking out another loan, or maxing out a credit card, you should speak with a reputable and licensed credit counsellor. They can analyze your financial situation, come up with a plan, and advise you on the steps you should take to deal with your debt. For some, a credit counsellor may be all you need to deal with your debt, for others, another debt relief option may be more suitable.

Click here to learn how a credit counselling agency can help you.

Debt Consolidation Loan

A debt consolidation loan is a great option for many consumers, especially those who have a lot of high-interest debt from payday loans (one of the worst types of predatory lending). A debt consolidation loan will allow you to pay off all your other debt so that you’ll only need to make payments on the one new loan. Your goal should be to get a new loan with a lower more manageable interest rate so you can save some money on interest charges while working to pay off your debt quickly.

Looking for more information about debt consolidation? Click here.

Debt Management Program

A debt management program (DMP), also referred to as a debt consolidation program is often best suited for those consumers who cannot get approved for an affordable debt consolidation loan. When you enter a DMP you’ll work with a trained professional who will guide you through the whole process and deal with your creditors on your behalf. You’ll meet with a professional who will assess your finances, create a plan for you, and even provide you with advice on how to better manage debt in the future. Here’s what you can expect from a DMP.

  • You’ll be required to pay off your debts in full.
  • You may be able to qualify for lower interest rates (keep in mind that your creditors may not agree to this).
  • If you’re debt professional is able to negotiate lower interest rates for you, you will save money on interest charges.
  • You’ll make one affordable monthly payment through your DMP which will then be distributed to your creditors.

A DMP will not reduce the amount you owe, but instead, help you pay off all your outstanding debts in full within a more manageable time period.

Debt Settlement

If you simply cannot afford to pay back all your debts in full, debt settlement might be the best option for you (learn how to qualify here). Whether you choose to contact your lenders and creditors yourself or hire a debt settlement company, your main goal is to have the total amount of money you owe reduced to a more manageable amount. Once you’ve paid the agreed upon amount to each of your creditors, usually in lump sum payments, your debts will be marked as paid off in full.

Consumer Proposal

A consumer proposal is a slightly less severe option than bankruptcy and should always be considered first. It is similar to bankruptcy in that you’ll work with a licensed insolvency trustee who will create a proposal for your lenders and creditors. If your creditors accept the proposal (which they aren’t legally required to do, read more about this here), then you and your creditors will have to adhere to the details of the proposal. Typically the goal is to have your interest rates frozen and the total amount of debt you owe reduced. You may be required to make one large payment or installment payments; again this depends on what everyone agreed to in the proposal.

Only unsecured debt can be included in a consumer proposal and you must owe less than $250,000.


If you’ve considered filing a consumer proposal and it simply wasn’t the right option for you, then you may need to file for bankruptcy. It is a legal proceeding and therefore you must work with a licensed insolvency trustee in order to complete the process. Unfortunately, while bankruptcy may be the right chose for you, it will still have a negative effect on your credit score and remain on your credit report for up to 7 years.

For more information on bankruptcy in Canada, read this article.

When it comes to dealing with debt from predatory lending, it’s important that you first, seek the help of a trained professional and second, make all decisions based solely on your financial standing. Choosing the right debt relief option is a serious decision but once you find the best fit you’ll be on your way to paying down your debts and securing the financial future you deserve.

Caitlin Wood avatar on Loans Canada
Caitlin Wood

Caitlin Wood is the Editor-in-Chief at Loans Canada and specializes in personal finance. She is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. Caitlin has covered various subjects such as debt, credit, and loans. Her work has been published on Zoocasa, GoDaddy, and deBanked. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security.

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