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Any way you look at it, life is expensive. Everything costs money. Buying a home, vehicle or even just paying for bills can be a large cost for many people.
Also, where you live can have a huge impact on how much you spend. For example, a home in London Ontario is now more expensive than a home in Edmonton, despite the city being much smaller.
As a result, getting ahead financially in these areas can prove difficult due to their expensive nature. Some earn incomes high enough to still pay for these high costs and even save money, but others are unable. These other people might rely on other means to keep their heads above water, such as using payday loans in London.
10 questions all consumers should ask before taking out a payday loan, click here.
What Are Payday Loans?
Payday loans in London and the rest of Canada are essentially a small and short-term loan, used to hold you over until your next payday. These are usually for a few hundred dollars, up to about $1,500. They have a term of normally only a few weeks and are accompanied by very high-interest rates most of the time. The interest rate will vary a lot but can be as much as 500%.
While they are among the most expensive ways to borrow money, sometimes, they are the only option. This is because they are quite easy to be approved for and can get you the cash you need quickly. There are likely many payday loan providers in your area that can provide you with a loan quickly and easily.
While many of these loans are legitimate, others certainly are not. Because of this, make sure you read the loan contract and its terms in full before agreeing to sign anything.
When applying for a payday loan, it’s important to know your rights, click here.
What is the Payday Loan Cycle? And How Do You Break It?
If you are going to secure a payday loan in London, it’s a good idea to learn about the payday loan cycle. The payday loan cycle is how some customers find themselves stuck taking out loan after loan to pay for the last one. The cycle looks like this:
- An emergency or other issue leaves you needing some additional cash.
- Only a payday loan is a quick and easy enough solution to get you the money you need.
- Unfortunately, by your next payday, you haven’t recovered enough to fully pay off the loan, so you take out another to cover the first.
This cycle can continue for months or potentially even years, and can absolutely decimate your finances and drain your savings. Now that you know a bit about the payday loan cycle, how do you break it? Well, there are a couple of things you can do to break yourself out of the payday loan cycle of debt. This includes:
- Budgeting correctly
- Cutting costs and expenses
- Plan ahead of emergencies
- Asking friends and family for help
- Taking out a standard unsecured loan with a fair interest rate
While making these sacrifices and changes isn’t always easy, they can help you get back on your feet.
The Warning Signs of Predatory Lending
While we mentioned that not all payday loans in London are bad deals, many are an example of predatory lending. Predatory lending is when lenders will try to take advantage of those who have no other options, such as people who need money quickly to cover an emergency. They understand that these consumers are desperate and will often settle for things people in better situations won’t.
Unfortunately, it’s not always crystal clear whether a loan is standard or predatory in nature. So how can you tell? Well thankfully, there are a few warning signs of predatory lending to keep your eyes out for. These include:
- Incredibly high-interest rates
- Hidden or add-on fees
- Guaranteed approval
- Rushing to get paperwork completed
- Asking you to lie or lying to you
Of course, this isn’t an exhaustive list but should give you a good idea about what a predatory loan looks like. If you feel uneasy about a loan or particular lender, be sure to steer clear. Also, if something seems too good to be true, it often is.
Looking for debt relief from predatory loans? This article is for you.
Alternatives to Payday Loans in London
So if a payday loan in London has a chance of being predatory, what other options do you have? Sometimes you need the extra money and are willing to do whatever it takes to get it. Thankfully, there is actually a fairly large list of payday loan alternatives that can be cheaper and better. Included in this list are:
- A standard installment loan
- Credit cards (while they are not much better, they’ll work in a pinch)
- Borrowing from loved ones
- Title loans or home equity loans
Now, all of these alternatives might not be right for you, but there is a good chance that at least one of them could be. They all offer much more affordable ways to borrow money but aren’t always easy to be approved for.
Find out why consumers in Ontario can’t break the cycle of debt, check this out.
When Payday Loans Make Sense and When Don’t
As you have learned, payday loans in London are a very polarizing option for getting the money you need. They are easy to get, but that convenience comes with very high-interest rates and potential hidden fees. So in what situations do, they make sense and when do they not? In an effort to help, we have crafted a simple guide on when it makes sense to take out a payday loan and when it doesn’t.
When Payday Loans Make Sense
Most of the time, payday loans simply don’t make sense and aren’t the right choice. They are expensive and in most cases, there are other options which will suffice. If you are in serious need of cash, will have the money to pay back the loan, and don’t have access to a credit card; a payday loan can make sense.
When Payday Loans Don’t Make Sense
As you could imagine, payday loans don’t make sense in most situations. They can cost you exorbitant amounts of interest and can come with extra fees to make them even more expensive. If you can avoid them in favor of other options, you should. They are an especially bad option when your bills take up most of your income, you want to purchase something that isn’t that important or you have an income that is relatively unstable and difficult to predict.
If you are curious about your own unique situation and whether a payday loan makes sense, be sure to speak to an expert for their opinion and assistance.
What Credit Score is Required For a Payday Loan?
When most people get a loan, one of the largest factors in determining their approval is their credit score and credit history. Those who have good credit and a good financial history will often get better rates and deals as they are less risky for the lenders.
However, when dealing with payday loans in London Ontario, your credit score doesn’t matter. That’s right, most payday lenders don’t take your credit into account when deciding to lend you money or not.
Instead, they will look at other things like your income, your job, where you live, your bank account and more. This is why these loans are so easy to get, as nearly everyone has a job, address and a bank account. This is also why these loans have such large interest rates, as the lender is often unsure of the level of risk a particular borrower will have.
Debt Relief For Payday Loans
As you have probably gathered by now, payday loans in London need to be used with extreme caution and very carefully. Taking out even a single one of these loans at the wrong time has the potential to cripple your finances for months or years to come. However, instead of continuing in the cycle or constantly using payday loans, there are other options you have as well, options to get some relief from your debt.
Some of the solutions you can utilize for relief from your debt caused by payday loans include debt consolidation, a consumer proposal, or even a standard personal loan. Each is different but has the same ultimate goal. These options exist to help you out of a difficult situation, so you don’t have to face your debt problems on your own. The debt relief solution you use or consider will depend on a lot of things such as how much debt you have, your financial situation, credit and more.
Is a Payday Loan Right For You?
If you are curious whether a payday loan in London is right for you or not, feel free to reach out to Loans Canada. We are confident we can help you find a reputable payday lender, or provide you with some high-quality alternatives.