Payday Loans in Ontario, Debtors Can’t Seem to Break The Cycle

Payday Loans in Ontario, Debtors Can’t Seem to Break The Cycle

Written by Caitlin Wood
Last Updated October 23, 2020

Depside the government of Ontario’s interference, payday loans in the province don’t seem to be going anywhere.

The Ontario government had taken measures to reduce the amount payday lenders were able to charge their borrowers per $100, from $21 down to $18. And now in 2018, the fee is even lower, $15 per $100 borrowed. So, did this accomplish what the government had hoped it would? Did it help lessen the burden of high-interest debt that so many Canadians can’t seem to break free from?

While it might depend on who you ask, recent research from insolvency experts Hoyes Michalos & Associates, paints a picture of a province stuck in the cycle of debt with very few options to get out of it. Insolvencies that contain payday loans are on the rise and it’s more likely than ever for a consumer in Ontario to have at least one payday loan when they file a consumer proposal or file for personal bankruptcy.

Do you know your rights when it comes to payday loans? Read this article

Choose Installment Loans Over Payday Loans

For consumers who are not already feeling the pressures of excessive unsecured high-interest debt, choosing a more affordable installment loan over a payday loan may help keep you out of the vicious payday loan cycle.

Payday loans require a borrower to repay the full loan, plus interest and fees, on their next payday. This only gives them a short two-week period to come up with the money to repay the loan. Since most payday loan borrowers are already experiencing financial issues, it’s often unlikely that they can do this. This is what can lead them to take on another payday loan with a different lender and so on until they are firmly caught in the payday loan cycle of debt.

If that same borrower were able to take out a small installment loan where they were given a longer period to repay the loan, they very well might be able to avoid the cycle of debt associated with payday loans.

Look For Debt Management Options Before it’s Too Late

For all Canadians who are currently dealing with high-interest debt and especially for those who are having trouble keeping on top of their payments, the best course of action is to speak with a professional before it’s too late. Ignoring bills and trying to tackle debt on your own when you really should be asking for help are two of the most common ways consumers get in over their heads.

You have options when it comes to debt management and there are professionals out there trained to analyze and determine which of those options will best suit your needs.

  • A small installment loan
  • A secured credit card
  • Overdraft protection
  • Credit counselling
  • A debt management program

Skip The Cycle Before it’s Too Late

Once a debtor is stuck in the payday loan cycle, it truly becomes almost impossible to break free. More debt needs to be taken on in order to cover existing loan payments which can and will stretch a household’s income so thin that there is simply no money to cover the necessities. If you can, it’s always in your best interest to avoid taking on payday loan debt.

Caitlin is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security. One of the main ways she’s built good financial habits is by budgeting and tracking her spending through the YNAB budgeting app. She also automates her savings so she never forgets to put aside a portion of her income into her TFSA. She believes investing and passive income is key to earning financial freedom. She also uses her Aeroplan TD credit card to collect Aeroplan points so that she can save money when she travels.

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