I was on Facebook this week and I saw an Influencer campaign for a payday loan company. A Canadian payday loan company was using mom bloggers to shill the benefits of payday loans. Let me be very clear about my take on payday loans and why all Canadians should try and stay clear of them. first, these high-interest loans simply do not make economic sense. I knew I had to write about this topic as well I have taken out several payday loans and getting out of that cycle of debt took hard work.
Payday loan companies say they are a quick and easy way to take care of an immediate financial need. They even tell you there interest rates which in Canada average anywhere from 15-23% per hundred dollars borrowed in 2019. They tell you it is an easy simple way to meet a financial burden. I am here to tell you they are wrong.
Payday loans are like gateway drugs, they can lead to a heap of trouble. Let’s look at the stats:
- Most Canadians carry some sort of monthly debt forward every month. That number continues to grow.
- 37% of all bankruptcies in Canada include payday loan debt.
The fact is those that take out these loans are often living payday to payday and can’t really afford the loan in the first place. Like me, back in the day, I lived payday to payday and struggled to get by. Payday loans came into play when I had maxed out the credit cards and needed to survive. A simple loan of $300 was repeated several times before I finally got wiser and started adding up the numbers. Payday loans have the highest interest rate when it comes to loans in Canada and they prey on the poor, that is why in recent years most provinces have capped the interest rates. The law across Canada is currently a Canadian can not pay more than 60% per annum. Here in Ontario for a $500 loan for 2 weeks, you will have to pay back $575.00 and if you are late there are fees on top of that.
So what can you do if you need money in a hurry instead of a payday loan?
Take a credit card cash advance. Yes, it still has an interest payment but it is far less than a payday loan.
Apply for an overdraft on your chequing account. Again, it has a far lower interest rate.
Already maxed out these resources?
Sell something. Find something you have of value and sell it.
See yourself in need of extra cash, pick up a side gig. Here in Toronto on the Bunz Employment page, I often see someone looking to hire someone for all kinds of temporary gigs. There are at least 50 different ways you can earn $100 online.
Ask to work overtime. Many employers will allow you to work up to their provincial maximums. Here in Ontario that is 44 hours.
Plan ahead. I have written time and time again about the need for an emergency fund and getting one started when you live payday to payday, its hard work. My suggestion, start small even $25 every pay is a start.
Negotiate a late payment. If it is a car payment, rent payment or the like and you normally pay on time call the lender/landlord and see if you can work out a plan.
Last but not least you can ask for help from family and friends. Get a loan from them just make sure you pay them back in a timely fashion.