To help you navigate post-CERB Canada, here is everything you need to know about what government help is available to you in 2022.
Are you a citizen of New Brunswick? Are your debts getting out of hand? If so, it might be time to consider a debt management product before your credit and finances being to suffer. In your search for a solution, you’ll probably discover the appealing nature of payday loans. Be careful! They can do much more harm than good to your finances and Loans Canada knows why.
To read about loans, credit, mortgages, and financing in New Brunswick, click here.
How the Payday Loan Cycle Can Ruin Your Finances
At first glance, payday loans seem very alluring. Unlike many typical creditors in New Brunswick, no examination of your credit report or credit score will be made when you apply. As long as you have a chequing account, a New Brunswick address and you’ve been steadily employed for at least 3 months, you can apply and receive a small sum (usually $1,500 or under) of cash within the same day. What could go wrong? Well, there’s plenty that can go wrong when the absurdly high-interest rates and fees get the better of you.
That’s right, in New Brunswick, payday loan lenders are still allowed to charge a maximum fee of $15 in interest for every $100 you borrow (as of January 1st, 2018). If you were to take out that $100 with a 14-day term (typical for payday loans), that comes out to over 391% APR (annual percentage rate)!
How the Cycle Works:
- You take out a loan, hoping that you’ll have enough money by your next paycheck to cover the total cost
- With all your other regular expenses, you’re unable to meet the 14-day deadline, adding penalty fees and other charges to your total debt
- Even if you manage to pay your debt by the end of the following term, it becomes all too easy to rely on payday loans every time you need fast cash
- You get deeper and deeper into debt. This can last for months, even years if you’re not careful
- While your loan payments won’t show up in your credit report, a string of missed payments could cause the creditor to sell your debt to a collection agency
- This could lead to a court case, followed by wage garnishment and severe damage to your credit report
- Your damaged credit will prevent you from approval on future credit products
Check out this infographic for a better understanding of the payday loan cycle.
Are Payday Loans Completely Unregulated in New Brunswick?
Fortunately enough, the New Brunswick Provincial Government has been taking measures to limit the amount of harm payday loans can cause. While payday loans haven’t been banned yet, new rules have been imposed, which every payday loan creditor must follow if they want to practice legally.
The rules include (but aren’t necessarily limited to):
- No creditor is permitted to charge more than $15 per $100 borrowed
- Creditors must be licensed by the FCNB (Financial and Consumer Services Commission of New Brunswick)
- No creditor is permitted to grant a loan that equals more than 30% of a New Brunswick borrower’s net pay (regular paycheck income after deductions)
- New Brunswick borrowers are allowed 48 hours to cancel their loan agreement without penalty
- Loan insurance is now an optional cost
- Creditors must display the rates they charge through clear advertising
- Every loan agreement must list specific terms, conditions and total costs
- “Rollovers” are not permitted (allowing the borrower to take out a second loan to pay for their first loan at an additional cost)
Is There a Way to Break the Payday Loan Cycle?
There are plenty of ways of preventing the payday loan cycle from occurring or breaking it once it spirals out of control. Your approval and payments for several of these options will depend on various elements, such as your credit score, employment history, and income, so ask your lender in New Brunswick about their requirements before you apply. Here are some of the solutions you can try out:
- Accessing your home equity – If you’re in the process of mortgaging or you currently own your home in New Brunswick, dipping into your home equity might be a good way of dealing with your expenses or debts so that you never have to rely on payday loans. Try applying for a HELOC (home equity line of credit), a second mortgage, or refinance your first mortgage. Want to know the difference between all these options? Click here.
- Offering your car title – Although this only works, if you own your car (or another vehicle) outright, it’s another way of consolidating your debt or covering your expenses. You can apply for a “car title loan”, the amount of which is dependant on the car’s present market value. Once you’ve been approved, you’ll pay back your loan through predetermined installments while your car is held as collateral.
- Taking out an installment loan – An installment loan (a type of personal loan) in New Brunswick allows you to borrow a specific sum of money, then pay it back over time through scheduled payments with interest. While collateral isn’t a necessary offering, it can help you secure more money and a lower interest rate.
- Using your credit cards – If you qualify, your credit cards are one of the safer payment methods you can use. However, since credit cards can also cause a lot of debt, make sure you are able to pay regular bills on time and in full before you go charging every expense to them. If you don’t qualify for ordinary cards, try applying for a secured credit card instead.
- Asking your friends or family – Once again, make sure you can pay them back before you ask to borrow money from them!
New Brunswick Borrowers Already in Debt Can Also Try:
- Credit counselling
- Debt management programs
- Debt consolidation loans
- Consumer proposals
To learn more about the benefits of these debt management products, look here.
Are Payday Loans Available Online in New Brunswick?
Most legitimate payday loan creditors do offer the option of applying online. However, it’s important, if you’re considering this service, to be extremely cautious. While a physical location can help you partially confirm a creditor’s legitimacy, online payday loan lending comes with the risk of scams. Desperate for financial aid, many borrowers in New Brunswick hand over their personal or banking information without checking customer reviews or looking to see if their company shows up in the database at the Better Business Bureau.
For more information about online payday loans, read this.
In fact, payday loans really only make sense when:
- You have a very pressing expense and no money on-hand to deal with it.
- You don’t qualify for other debt relief products in New Brunswick.
- You’re absolutely certain that your next paycheck will cover the cost of your loan.
Can I get a payday loan in New Brunswick if I’m unemployed?
What is the maximum allowable interest rate for payday loans in New Brunswick?
I took out a payday loan. Will my credit score be affected?
Loans Canada, the Right Choice
Before you apply for a payday loan in New Brunswick, remember that Loans Canada is always here to offer you better plans and prices. We can set you up with the right financial aid tool for all your needs. Apply today to discover the benefits that our team can provide!