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We get it; at first glance payday loans seem convenient and can come across as a great option when all other options have failed. But what we can’t stress enough is that convenience quickly turns into a nightmare and your quick short term loan that was meant to help out becomes a huge financial problem. The payday loan industry can be conniving, deceitful and downright evil, and that’s on a good day. So if you’re thinking about getting a payday loan or if you already have one that’s starting to spiral out of control, here is everything you need to know.
Learn about how payday lenders prey upon the poor here.
Payday loans are a specific type of loan provided by a specific type of lender, here’s a quick break down of what you should expect from a payday loan:
For the most part it is extremely easy to get approved for a payday loan, this is why they are so attractive to people experiencing financial issues. Your borrower will usually ask for the following 3 things:
Payday loans are one of, if not the most expensive form of credit. Before you even consider a payday loan as an option you need to make sure that you’ve exhausted all other alternatives.
In Ontario, legislation has been passed to prevent payday lenders from charging extreme interest rates and fees. And while this legislation has helped to protect consumers, payday loans are still predatory in nature. Since there are set rules for how much a payday lender can charge a borrower in Ontario, we’ll use this province as an example to show the true cost of a payday loan (interest in more information about the true cost of a payday loans? Read this article). But keep in mind if you live in any other province the laws, rules and regulations will be different and lenders will more than likely charge extreme rates.
Let’s compare a payday loan in Ontario to a standard credit card available to anyone in Canada:
|1 loan = $300 for 2 weeks||Payday Loan||Credit Card (23% interest)|
|1 loan will cost||$63||$2.65|
|2 loans will cost||$126||$5.29|
|4 loans will cost||$252||$10.59|
|6 loans will cost||$378||$15.88|
In the event you are unable to repay your payday loan by it’s due date, there are a number of reprucussions that may follow.
Learn more about what can cause your credit score to drop.
The majority of provinces in Canada have in recent years passed some form of payday loan legislation. New Brunswick, Quebec and Newfoundland and Labrador are the only provinces that have no specific laws concerning payday loans, therefore if you live in one of these provinces you need to be extremely cautious when dealing with payday lenders.
For the other provinces that have passed legislation concerning payday loans, here a few of the major issues you need to beware of (we suggest that you make sure you fully understand the payday loan laws or lack of laws in your specific province before moving forward with a payday loan):
Learn about how the payday loan cycle starts.
Again this depends on the province you live in but most payday lenders are required to adhere to at least some version of the following rules:
If you’re concerned about a payday lender that you’re currently dealing with, get in contact with the consumer protection branch of your provincial government.
Before you consider taking on any kind of debt, especially a payday loan you need to have a repayment plan in place. The consequences of being unable to make your loan payments on time and in full will negatively affect your finances for years to come.
Build your repayment plan by learning how to budget.
Before you make any decisions about applying for a payday loan you should ask yourself the following questions:
Even more questions you should ask yourself before you get a payday loan.
Once you’ve asked yourself these questions you should have a better idea of what you’re getting yourself in to.
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