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Living in Saskatchewan? Looking for a way to finance a necessary expense? Thinking about applying for a payday loan to cover it? Think again! While payday loans might appear helpful at first, they can cause extreme damage to your finances if you’re not careful. If not handled properly, any payday loan in Saskatchewan can spiral out of control, forcing you into a never-ending cycle of debt.
Why is the Payday Loan Cycle So Hard to Break?
Essentially, people apply for payday loans when:
- They have bad credit and unhealthy finances, causing banks and other lenders to deny their applications
- They have some kind of emergency expense on their hands that their low income won’t cover
- They realize how easy it is to get approved for a payday loan in Saskatchewan, but don’t know about the negative effects they can bring about
Payday Loans Are Easy to Acquire Because:
- They are usually for small sums ($1,500 or less)
- A borrower’s credit status doesn’t matter. Most payday loan lenders don’t even perform a credit inquiry or check a borrower’s credit score
- Only an active checking account, proof of address and 3 months steady income are required
- At physical payday loan shops, there’s almost no wait time for approval. You apply and walk out with your money within an hour or so
Difficulty Paying Arises When:
- A borrower’s other expenses, low income, and/or high-interest rate stops them from paying their loan within 14 days (most common payday loan term)
- Penalty fees and even higher interest rates are added
- They’ve accidentally applied with a predatory lender who tries make them pay their first loan by “rolling over” into a second loan, thus beginning a cycle of debt that’s extremely hard to break, lasting for months, maybe even years at a time
Payday Loan or Installment Loan?
If you’re looking for an alternative to a payday loan in Saskatchewan, one helpful option might be an installment loan. They’re called “installment” loans because once approved, you’ll be able to reimburse your loan through equally divided payments over a specified schedule, usually, several months to a year, depending on how much you’re borrowing.
Scenarios where an installment loan is better:
- You have a reasonable credit score and enough income to cover all your payments in full (plus interest) by the end of your payment term
- You need to pay for a larger expense (more than $1,500)
- You’re looking for a much lower interest rate
- You’d like the option of negotiating a longer payment period
Scenarios where a payday is better:
- You have an extremely important expense that needs to be covered immediately
- You can afford to pay back your full loan within one 14-day payment term
- You have terrible credit and don’t qualify for a regular credit card
- You don’t qualify for any (more beneficial) alternatives to payday loans
What Are My Alternative Options For Payday Loans in Saskatchewan?
If you’re looking for another way to pay your debts or if you’re already having trouble breaking your payday loan cycle, there are more alternatives that can help you, such as:
- Secured credit cards: Made for borrowers with bad credit, you can secure these types of cards with a security deposit equal to the amount of credit you want. You can then use your card to pay your debts and improve your credit. Once you pay back your full balance and cancel the card, your deposit will be returned and you may qualify for a regular credit card.
- Debt consolidation loans: If you have decent credit and a relatively good income, a debt consolidation loan can help by piling all your other debts into one payment with a more reasonable interest rate. This makes your debt cheaper and easier to manage over time.
- Debt management programs: If you have a large amount of debt, you can team up with a credit counsellor who will negotiate for a more affordable payment plan with your creditors. If accepted, you may even have your debt reduced.
- Consumer proposals: A slightly more drastic approach to debt consolidation, these proposals are legally binding contracts, acquired through a licensed insolvency trustee and reserved for those in extreme debt. If approved, you can negotiate a partial payment of your debt or have your payment period extended.
- Bankruptcies: If your debt total is over $1,000 and you have no possibility of paying any of it back, personal bankruptcy can be a final, even more, drastic solution. Again using an insolvency trustee, your debts will be discharged once you’re approved. Instead, you’ll make payments through your trustee toward the court over an arranged period. Be warned, filing for bankruptcy can damage your credit for up to 7 years!
How Can I Tell if My Payday Loan Lender is Predatory?
Even though they can cause major debt problems for a lot of Saskatchewan residents, some payday loan lenders are still legally allowed to operate in Canada, as long as they follow certain regulations. However, there are a ton of illegal predatory lenders across the country that try to take advantage of borrowers in desperate financial situations.
Click here to learn about the regulations for legal payday loan lenders.
Here are some warning signs to watch out for:
- They aren’t clear about the fees they charge for their services. With any loan or credit product, it’s essential to read the fine print and know everything about the payment process. If the rules are unclear or the salesperson is being vague about what they charge in terms of interest, penalties or otherwise, walk away.
- They use inappropriate behaviour to sell their products or get you to pay. No matter how much you need or owe, it is illegal for any lender to pressure or threaten you into applying or paying. If they do, they’re likely trying to scam you.
- They “offer you” an option to roll over. As mentioned earlier, one practice that has also become illegal in Canada is the “roll over” tactic, when a lender gets you to cover your first unpaid loan using another. If they try to sweet talk you into this illegitimate service, it’s a surefire sign of predatory lending. They are not allowed to sell you another loan until your previous one is paid completely.
- They purposely withhold information. While even legitimate payday lenders will probably try to butter you up in some way, they’re still required to provide you with every shred of information concerning the approval and payment process. If it seems like your lender is dancing around the subject and avoiding your questions, it’s another telltale sign of a scammer’s tactics.
Frequently Asked Questions
Can I apply for a payday loan without a credit check in Saskatchewan?
Many lenders don’t do a credit check for payday loans. They also don’t usually report to credit bureaus directly. However, they will still want to verify your identity, your source of income, and your bank details if applicable. Having no credit check will benefit you since it won’t affect your credit score. However, if you fail to repay your loan, it will be sent to a collections agency who will report it to the credit bureaus. Having an item in collections will greatly reduce your credit score.
What is the interest rate limit for payday loans in Saskatchewan?
In Canada, the maximum annual percentage rate (APR) on loans is 60%. However, payday loans have special rates that depend on the province. In Saskatchewan, it’s $17 per $100 borrowed. In a typical two-week period, this means an APR of close to 450%. The reason payday loans are structured this way is that they are meant to be repaid in full within 2 to 8 weeks, or 1 to 2 paychecks. Because of the quick turnaround, typical interest rates simply wouldn’t work with a payday lender’s business model. Payday loans are also typically used by those with poor credit ratings or no credit history, meaning higher risk. Lenders will invariably charge higher rates for higher-risk clients.
Can I still get a payday loan even if I’m unemployed?
Yes. Certain providers will consider non-employment income. If you receive certain kinds of income support from the government, you may be approved by some payday lenders. Depending on the provider, they may consider sources of income such as the Canadian Pension Plan (CPP), Employment Insurance (EI), disability assistance, and private pensions. So long as you can keep up with the payments and have the budget for it, certain lenders will be willing to work with you even if you’re unemployed.
Try Loans Canada Instead
If you’re reading this and have decided that a payday loan in Saskatchewan is not the way to go, then you’ve probably made the right choice. If you wish to be connected with an alternative solution, Loans Canada is the team to talk to!
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