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Have you ever found yourself in a financial conundrum with money been a little too tight to cover a pressing expense?
You’re not alone. Many Canadians find themselves in this exact situation from time to time, prompting them to seek out financial assistance to help them make ends meet. If your current bank account doesn’t have the funds you need to take care of an expense, there are loan products available that can help bail you out, and payday loans are one of them.
But are payday loans in Brampton something you should look into when money issues arise? Let’s dig deeper into these specific loan types to see if they’re right for you.
Check out this article to learn why Ontario residents are struggling with payday debt.
What Are Payday Loans?
Payday loans are specific loan types that are designed to provide short-term relief to borrowers. They are typically very short-term in duration and must be paid back within a small time frame, typically two weeks after the funds have been granted. They are named so because the money must usually be paid back in full by the time the borrower’s next payday rolls around.
Loan amounts are also smaller than the average installment loan and don’t typically exceed $1,500. The amount owed must be paid back in one lump sum as opposed to installments, as is the case with most other loan types.
Interest Rates Charged on Payday Loans
Payday loans in Brampton are typically a more expensive loan type simply because of the interest rate charged. You can expect to be charged three figures in interest rates, even as high as 500%. And the higher the interest rate that you are charged, the more expensive your loan will be. Not only do you have to pay back the loan amount, you also have to pay back any interest accrued.
Be sure to determine the exact rate you will be charged, which your payday lender is obligated by law to disclose when you take out this type of loan.
Further, make sure that you check out all the fees that the lender charges, which will also be added to the final total. Such fees can include things such as those for administration, pre-authorized debit, and bounced checks.
Stay Away From the Payday Loan Cycle
If you’re not careful, you could get stuck in the vicious payday loan cycle. Some borrowers who take out payday loans find themselves unable to repay the full amount by the due date. When this happens, they may take out another payday loan in order to cover the cost of the original loan amount that is due.
The cycle can continue with you taking out loan after loan to continually cover your tracks. This can go on and on until you find yourself in a huge pile of debt. This situation can be extremely difficult to get out of and becomes increasingly challenging to emerge from with each loan taken out.
Alternatives to Payday Loans In Brampton
In order to avoid the potential risks of payday loans, including the dreaded payday loan cycle, you may want to consider other loan options to get your hands on the money you need to cover an expense, such as the following:
Personal loans – A personal loan allows you to repay the loan amount in installments, which is much easier to do as opposed to having to come up with the entire lump sum repayment within a short period of time. Further, you’ll have more time to make the full repayment, unlike the short time frame that you’re given with a payday loan. Not only that, but the interest rate will likely be much lower, too.
Vehicle title loans – If you own your car outright, you may be eligible for a vehicle title loan. This loan type involves exchanging the title of your car for a certain loan amount. After you’ve repaid the loan amount, the lien that was placed on your car title will be removed.
Home equity loan/HELOC – If you’re a homeowner who has a certain amount of equity built up in your home, you may be eligible for a home equity loan or HELOC (home equity line of credit). To qualify, you must have at least 20% equity in your home.
Getting Help For Your High Debt Load
Are you finding it tough to get yourself out of debt, and a payday loan has just added to the pile? Then you may want to consider seeking professional financial help.
Fortunately, there are many options available to you, including the following:
Credit counselling. Credit counsellors are professionals who are in the business of educating consumers on how to better manage their finances and debt. Depending on your situation, credit counsellors may help you establish a workable budget, deal with your credit, and help you take steps to pay down your debts.
Debt consolidation. There are two types of debt consolidation for consumers to choose from, either a program or a loan. The main goal of each is to help alleviate the stress of dealing with multiple debts by consolidating them into more manageable monthly payments.
For more information about applying for debt consolidation, click here.
Debt settlement. If your debt situation is dire and you just can’t seem to make a dent in it, you may want to consider debt settlement. Debt settlement involves settling your debt with your creditors, leaving you with either a much lower debt amount to pay or no debt left at all. It’s important to understand that debt settlement will negatively impact your credit score as your credit report will show that your debt was settled instead of paid.
Be Wary of Predatory Payday Lenders
The majority of payday lenders are reputable. But just like any other industry out there, you’ll always find the odd lender who doesn’t have your best interests at heart. Unfortunately, predatory payday lenders exist and can put you in a bad financial situation if you’re not careful. The question is, how can you spot this type of lender to protect yourself?
Here are some signs to look out for:
- They guarantee loan approval
- They require that you pay an insurance fee before the funds are provided
- They are careless about luring consumers into “rollover loans” that suck them into a payday loan cycle
It’s always important to know your rights when dealing with payday loan lenders.
Is a Payday Loan Right For You?
Payday loans in Brampton are a risky loan type that can pull you into a cycle of unending and mounting debt if you’re not careful. That said, if you believe that you have the financial means to handle this type of loan and can make the full repayment in a short amount of time, then it may be a potential option. Plus, they’re easy to get approved for and typically provide funds very quickly.
However, there are other loan options available that might be better suited for you. Make sure you take the time to assess these options against your situation before deciding which route to take.
When is a Payday Loan a Bad Idea?
Generally speaking, payday loans in Brampton should be your last resort, as other loan options are safer. But there are instances where payday loans should be avoided altogether, including the following:
- You’re spending up to the limit on your credit card to pay your bills
- Your income is not sufficient enough to pay your bills in full
- Your job is unstable
- The expense you want to pay for is not an urgent one
What Credit Score Do You Need For a Payday Loan?
In order to get approved for a typical loan, you need to have a decent credit score. For conventional loans, that means a score of at least 650 to 680 is usually required.
However, the criteria to secure a payday loan is much less stringent. That means your credit score doesn’t have to be as strong to get approved, making these loans a lot easier to secure compared to other loan types.
Lenders who provide payday loans don’t place too much weight on credit scores, and instead, just want to make sure that you have a steady stream of income. Some lenders don’t even look at much at all, which is a sign that the lender is not one you should be dealing with. All reputable lenders should look at some aspects of your financial health in order to make sure you’re capable of handling the payments.
In Need of a Loan?
No matter what type of bills you need to pay, sometimes a loan can come in handy. And while payday loans in Brampton are certainly an option, there are other alternatives that you may want to consider. Call Loans Canada to help you navigate all of your options.