Seniors Turning To Payday Loans A Scary Trend
The number of seniors facing debts is increasing dramatically.
According to a study done by Statistic Canada between 2012 and 2015, one in 5 seniors in Canada struggle with debt.
It’s an increase of 40% compared to the financial situation of seniors 15 years ago.
Seniors, nowadays, are saving less and spending more.
Many rely on credit to help with essential expenses and living costs.
Indeed, as seniors have no option to increase their income, they find themselves with no alternative but to use their credit cards, lines of credits, or reverse mortgages, which amplifies their financial problems.
Additionally, it’s fair to say that many seniors want to help the family.
As a result, seniors turn more and more towards payday loans to pay off existing debts.
They often encounter higher debts in the process.
They have the highest average payday loan debt among all age groups.
Seniors turning to payday loans is a scary trend.
Payday loans are bad news for insolvency
Payday loans are the quickest and most easily accessible type of loans.
Seniors can find payday loan companies online and apply in a few clicks.
Before they know it, they’ve racked up their debt, rather than reduce it.
According to Hoyes & Michalos research, payday loans make up almost 40% of all insolvency cases in 2019.
It’s a significant increase compared to 2011, where they represented a little over 10% of insolvency cases.
Their high interest rates, 400% and over, multiply the amount seniors owe out of control.
It comes as no surprise that seniors continue to choose payday loans as a go-to solution despite the gigantic interest rates.
When they need money to cover essential expenses, the quick process of payday money lenders is appealing.
On average, a senior debtor has 3.1 payday loans, making it hard for them to pay off their debt.
Are seniors a target for payday loan companies?
The quick answer is yes.
But in reality, everyone is a target for payday loan companies.
Seniors enjoy the simple borrowing process as companies don’t run any credit checks.
Therefore, they can obtain a loan quickly though they wouldn’t qualify with traditional lenders.
Unfortunately, the process creates a vicious debt cycle that exposes seniors to increased financial risks.
Seniors borrow against their pension income – retirement benefits, ODSP, CPP, Old Age Security, Canadian Pension Plan, etc.
In the long term, payday loans could leave seniors with no source of income.
How payday loan debt gets out of control
Seniors who take a payday loan do so to avoid a financial crisis.
Unfortunately, financial difficulties don’t end when the money lands in their account.
Payday loans generate unmanageable debts for seniors, with 21% of all senior filing for insolvency struggling to pay off their payday loans.
With limited opportunities to increase their income, seniors are unable to recover from payday loans without restructuring their finances.
For many, filing personal bankruptcy with the help of a licensed insolvency trustee is the only way out of payday loan debts.
Breaking away from the payday loan cycle is not easy , which is why trustees can offer seniors the peace of mind they need.
Seniors turning to payday loans for support is a scary financial trend.
Get in touch with a licensed insolvency trustee in Canada to find a way out of payday loan debts.