According to a recent study, last year 37% of insolvencies in Ontario were directly driven by payday loans We understand the overwhelming stress and struggles that many people face when confronted with large amounts of debt and the looming face of insolvency. If you’re facing debt and you feel as though you’re running out of options, don’t be tempted by payday loans. They may seem like a reasonable short-term solution, but these loans should be avoided at all costs. Our licensed insolvency trustees help people plan and manage their debts every single day. Don’t fall prey to bad advice or short term fixes that will wreak havoc on your finances later. Keep reading to learn more about the impact payday loans have had on Canadians facing bankruptcy. Let’s recap: What are payday loans? Payday loans are short-term loans meant to provide a bridge between paycheques. They look fine on paper: borrow a small amount and repay it when your next payday comes around. The problem is that in spite of legislative measures, interest rates on these kinds of loans can reach a staggering 546%, and the agreements you sign allow the company to debit the amount you owe from your bank on the day it’s due. This means you might need to take out another loan the next week, and then another. You could find yourself sinking into an ever-increasing debt.
Avoid the Cycle of Debt
According to a recent study, last year 37% of insolvencies in Ontario were directly driven by payday loans. Additionally, the average payday loan size has steadily increased in the last few years, despite attempts by the government to impose limits. The problem is that payday loans trap heavily indebted borrowers in a cycle of debt. People with pre-existing debt are more likely to take out multiple loans to cover fees, and payday lenders have a history of targeting low-income neighbourhoods.
Are there better options?
The bottom line is that payday loans are not good way to achieve financial stability. At best, they’re a last-resort, one-time fix that you hopefully never use again. At worst, they can trap you in an unending cycle of ever-increasing debt.
There are many other personal debt solutions you should look into before even considering these kinds of loans. Extending your credit card limit or taking out a small loan from your bank are two ways to borrow money with much lower interest rates. You can also borrow money from a family member using a legally binding agreement. Another option is to seek the help of licensed insolvency trustees who are well-versed in helping people regain control of their financial future and set them on the right path to avoid insolvency.
Don’t hesitate to ask for help!
Admitting to financial difficulties isn’t easy, but remember that licensed insolvency trustees are federally regulated professionals who can provide you with help and advice. With over 65 years of experience, the team at D. & A. MacLeod Company can help with debt consolidation, filing for bankruptcy and more. The first consultation is always free, so call us today to set up an appointment and take your first step towards financial freedom.