Just Say No to Payday Loans
With the holiday season behind us, and credit card bills slowly trickling in, we must now confront the amount of debt we have accumulated over the past few months. According to an article published by the CBC , the average Canadian family now spends roughly $1,500 during the winter holiday season.
For those of us who were less attentive than we perhaps should have been, this figure can come as a shock to us, making it difficult to resist the lure of payday loans. A payday loan is a short-term, high-interest loan , which, in Ontario, must be paid back within 62 days of being issued. If the debt is not repaid on time, the borrower is faced with exorbitant fees and interest charges .
While these predatory institutions will say much to reassure borrowers, the reality is that payday loans often cost more than they are worth. Payday lenders prey upon borrowers that they know will end up having to repeat the cycle , which, in turn, means more interest collected for their institution.
These loans, which are meant to cover a cash shortfall until your next pay or for a short period of time , are easy to acquire, but difficult to pay back. When used to cover ongoing costs such as rent, groceries, or utilities bills, many borrowers find themselves stuck in a payday loan cycle , that is, taking on additional debt at an even higher interest rate to cover the initial debt.
As mentioned, the interest rates charged on payday loans are generally very high, sometimes as much as 500 to 600 percent , according to the Government of Canada . This is not including the cost of non-sufficient funds (NSF) fees if your cheque or pre-authorized debit does not go through, which can tack on an additional $25 to $48 each time .
With payday loans, a single stumble on the path to repayment can quickly become an insurmountable hurdle. At Crawford, Smith, and Swallow , so many of the people we meet have payday loans. Luckily, you have options. Before you find yourself in hot water, consider alternatives to payday loans in the event of financial emergency.
For more information on personal bankruptcy and debt relief options, speak to one of our experienced Licensed Insolvency Trustees (LITs) today .