Debt Experts Explain Why Predatory Payday Loans Are Not a Trusted Source of Debt Help
Predatory payday loans are never a good choice. Learn more about these other options available if you are facing debt or behind on credit card bills.
Whoever said, “you have to spend money to make money” was not referring to expensive payday loans. We know that it can be tempting. You are a week away from your paycheck, your bank account is about to go into the negative figures, you have nothing left to pawn, and you need to eat. That neon sign in the mall window, flashing “Payday loans,” starts to look like your only option. Unfortunately, that’s exactly what most payday lenders want you to think.
Ontarians Should Avoid Predatory Payday Loans Like a Financial Plague
A payday loan is defined by the Government of Canada as “a short-term loan with high fees that make it a very expensive way to borrow money.” The lender looks over your most recent pay cheques and determines the amount that you are eligible to borrow. The amount is legally capped at $1500, but this does not necessarily account for fees. You will enter into a legal short-term loan contract requiring you to pay that amount, plus interest of up to 546% back with your next pay cheque.
Many of these lenders will automatically debit the amount from your bank account the day that it’s due, making unexpected expenses even more of a problem. If you are unable to pay it back on time for any reason, expect major penalties and aggressive collection tactics.
Don’t Make a Bad Financial Situation Worse by Falling Into a Cycle of Debt
In case you missed it, payday loan interest rates are somewhere around 546 percent. If you thought that your credit card interest was high, think again! Borrowing even a small amount of money is expensive and can trap you in a cycle of debt that never seems to stop.
While these types of loans are meant to be used on a short-term basis for minor financial shortcomings, many people find themselves taking out another one every week to compensate for the amount that they just paid back. Each time that they pay the amount back, they pay a little extra in fees, until they are borrowing against their entire paycheck just to get through the week.
Instead of taking out a payday loan, try these alternatives first:
- Consider extending your credit card limits.
- Borrow a small amount from your bank or credit union.
- Ask for an extension or payment plan for upcoming bills.
- Borrow money from family using a legal and binding repayment agreement.
- Ask your employer for an advance.
- Get professional help – connect with a licensed insolvency trustee, credit counselor or financial adviser to explore your options together.
Our Teams Are Ready to Help You Start Your New Beginning™
It’s always better to seek help from a licensed insolvency trustee before continuing a seemingly never-ending cycle of debt. It can be embarrassing and even a little intimidating to admit to financial trouble; but having someone you can trust on your side can also be a huge relief. You have rights when it comes to payday lenders and knowing these can help you escape from high interest rates and predatory lending practices. D & A Macleod can help lead you out of the land of revolving debt, and back onto the path to financial independence.
Contact us today for debt help and schedule a free consultation. We know what you are going through and our licensed insolvency trustees can help you take control of your finances. Make a commitment to yourself. Declare that everything is under control and that tomorrow really is a new beginning™.