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📅 Last Updated: October 1, 2021 ✏️ Written By Bryan Daly 🕵️ Fact-Checked by Caitlin Wood
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Chances are you’re going to encounter lots of different expenses in your lifetime, whether you’re living in Charlottetown or anywhere else in Canada. And, when those expenses get out of control, it’s essential to find a solution that’s not only efficient but works well for your particular financial situation. The problem is, when dealing with financial woes of any kind, it can be tempting to turn to the easiest, most convenient solution, no matter how risky it happens to be. While a payday loan may seem like the best or most effective option in Charlottetown, they certainly come with their fair share of issues.
Before You Consider a Payday Loan…
Now, before we delve into what payday loans are and why they are so risky, just know that they should be avoided unless you have no other choice. In fact, there are plenty of safer options in Charlottetown that should be considered before you choose a payday loan, including but not restricted to a:
- Short-term loan
- Personal loan
- Installment loan
- Bad credit loan
- Credit/debit card
- Home equity loan or HELOC (home equity line of credit)
- Car or vehicle title loan
- Debt consolidation loan or program
- Debt settlement
Interested in building home equity in Canada? Try looking here.
Before You Consider Any of the Options Above…
Like a payday loan, each of the above options may be useful or harmful when it comes to a number of financial situations because each has its own benefits and drawbacks. You may not even qualify for some of these products, depending on how much debt you have, what your financial strength looks like, and what your particular lender’s standards for borrowing happen to be. That said, these options are still far less risky and would potentially cause less lasting financial damage than any payday loan, as long as you’re using them responsibly.
Read this to discover how you can use a short term loan to tackle any expense.
For example, while a bad credit loan might come with a high-interest rate, the rate is still going to be lower than a payday loan. And, even though you will likely be in debt to your bad credit lender for some time, at least you should be able to negotiate a payment plan that works for you and allows you more than 2 weeks to pay back your balance.
Don’t apply for a loan until you check this out.
Why Are Payday Loans So Risky?
No matter where you are in Canada, a payday loan is a risky investment to take on. However, they happen to be particularly dangerous in Prince Edward Island, where payday loan lenders are permitted to charge rates of up to $25 per $100 you borrow, one of the highest permissible lending rates of any province. Those rates, combined with a slew of additional, often hidden fees associated with all P.E.I. payday loans make them far more hazardous than almost any kind of financial product on the market in Charlottetown and Canada, in general.
Click this link if you want to learn about online payday loans in Canada.
Even though payday loans in Charlottetown have been capped at a maximum of $1,500, a relatively small amount compared to other loan types, the other reason they can potentially be dangerous is that they are so easy to get. That’s because:
- Your credit will not be an issue (no credit check is performed).
- Loans can be approved and received on the same day that you apply.
- The only necessary elements for approval are your proof of residency, bank account, and viable source of income.
Looking for a loan in Canada with no credit check? Read this first.
Rollovers and the Payday Loan Cycle
While several provinces are trying to ban payday loans or, at the very least, establish more effective regulations to control the amount of debt they can cause, it seems that Prince Edward Island is not as strict yet. This is particularly problematic when it comes to payday loan rollovers.
A “rollover” refers to a lender granting you an additional payday loan before the terms of your original loan have been met. Illegal in 6 out of 10 provinces, Charlottetown borrowers are allowed to apply for a second payday loan before they’ve paid off their first loan. Actually, a common reason why borrowers in Charlottetown do this is because they can’t afford their first loan and, therefore, fore take a second to cover it. This is how the payday loan cycle begins. These piled up loans, coupled with the high-interest rates, extra fees, and late penalties can turn a once small loan into a ridiculously expensive debt that can go on for years if the situation isn’t rectified. This is just one reason why you must be extremely cautious before you even think about applying for a payday loan in Charlottetown.
Check out this infographic for even more information about the payday loan cycle.
The Dangers of Predatory Lending
While even legal payday loans can damage your finances, illegal operations can also get the better of you if you’re not careful. Unfortunately, scam artists prey on borrowers who are seeking fast cash.
Avoid the “Lender” if They:
- Try to Charge you more than $25 per $100 you borrow (25% interest)
- Won’t answer your questions or give you all the information you need
- Don’t have advertising that displays the cost and terms of their loans
- Don’t have loan contracts that convey those same costs and terms
- Use forceful or abusive tactics to get you to pay
- Don’t have a page in the Better Business Bureau database
- Refuse to cancel your loan within the 2-day “cooling off” period (in P.E.I. you’re legally allowed 2 business days to cancel your payday loan, penalty-free)
Remember, these are just a few of the basic signals that the supposed lender is a fake. Always do a lot of research when comparing lenders in Canada. Even though legitimate payday loan lenders charge you a high price for their services, they have no right to harass or manipulate you. And, of course, if the deal is too good to be true, it probably is.
Looking for debt relief from predatory loans? Try reading this.
Is a Payday Loan Ever Acceptable?
The reality is, not everyone in Montreal is able to get approved for regular loans or other financial solutions, especially through banks and other prime lenders, where criteria for would-be borrowers tends to be more strict. So, there are a few rare cases when a payday loan could be considered an acceptable last resort, such as:
- When you have extremely bad credit (credit score of 500 or lower)
- When you don’t have any assets (house, car, etc.) to offer as collateral
- When you can’t find a cosigner with better financial strength
- When you are pressed for time and need your expenses covered immediately
- When you’re 100% sure you can handle the financial burden of a payday loan
- When you can afford to pay the loan back completely within your first term
Do you have bad credit? You might want to consider a guarantor loan.
When Is a Payday Loan Not Acceptable?
Since even a single payday loan can end up being so detrimental, it’s best to avoid them if you have the means to. In fact, if your financial situation resembles any of the scenarios below, you’ll likely be better off without payday loans in your life:
- When you qualify for regular, prepaid, or secured credit cards
- When you work part-time, freelance, or other unsteady employment
- When you do qualify with a prime lender (banks, credit unions, etc.)
- When you don’t qualify with a private, alternative, or bad credit lender
- When your other daily expenses generally take up your whole paycheck
- When you can find a cosigner or offer collateral to secure a traditional loan
Wondering which lenders allow you to use a cosigner? Find out here.
Contact Loans Canada Instead
Decided to avoid payday loans in Charlottetown? Good idea. However, if you’re still looking for a loan or other type of financial solution, we’re confident that we can help you. Contact us today or apply below!
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