Why Credit Counselling Doesn’t Help With Payday Loans

You may realize one day that you’re caught in the payday loan trap. Take time to learn more about Why Credit Counselling Doesn’t Help with Payday Loans.

It can be tough to be in a position where you’re always struggling to keep up with credit card and other debt payments. As a last resort, many people end up turning to payday loans as a solution and way to receive some relief.

You may come to realize one day that you’re caught in the payday loan trap and are looking for a way out. In turn, you might start to wonder about which is better – choosing credit counselling or a consumer proposal. If you’re seeking debt elimination and have multiple payday loans or payday loans on top of other debts such as credit cards and student loans, then a consumer proposal is usually an ideal solution. Continue reading to learn more about Why Credit Counselling Doesn’t Help with Payday Loans.

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A Closer Look at Payday Loans

Take, for example, a person who visits a credit counselling company because they have multiple payday loans to juggle. It happens that people will take up to even 11 different payday loans at once. You may be wondering how this occurs. The truth is that it’s quite easy to fall into the trap and not that uncommon.

You may choose to take out a payday loan to tide you over until your next paycheck. However, you’ll likely find that you come up short again in the following pay period. It means that you might go out and seek another payday lender to pay off the first and then end up borrowing more money to pay your rent. There are a large number of online payday loan lenders so carrying more than one payday loan is quite simple. The transactions aren’t reported to your credit bureau, so you may lose track of how many loans you have outstanding. The cycle of borrowing may go on for a while until you end up owing a lot of money.

Credit Counselling

You may be quick to think that credit counselling will help to solve all your money problems when it comes to payday loans. You might consider a scenario such as being able to repay all the debt and consolidating it into one single payment while spreading monthly payments over a time period such as 60 months. The hope is always to break the cycle and to find financial freedom again. Therefore, you may be enticed to sign up for a debt management plan so you can get on a repayment schedule.

The truth is that many of these plans are merely unaffordable and not realistic. There may be many reasons why credit counselling doesn’t help with payday loans and is not a good option to deal with all the debt. For example:

  1. The monthly payments can be front end loaded, making for high initial payments, more than what you can afford.
  2. In aggregate, credit counselling would still have required you to make payments totaling over 15,000 dollars, including interest and counselling fees of more than 6,000 dollars.
  3. The debt management plan may exclude all of your other debts, so you still need to keep up with all those payments as well.

Getting Payday Loan Help

You need to work with a company that’s going to perform a full debt assessment when you need payday loan help. It’s essential to review all your debts to figure out better what you can afford to repay. The full assessment is very eye-opening and will show all the unsecured debts and amounts you owe in total, including payday loans, bank loans, credit cards, tax debts, and other financing loans. You’ll likely discover that when looking at the whole picture, it’ll be impossible to keep up with all these payments.

You need to take into account your monthly income and debts so that you can give your creditors a realistic settlement proposal, which may be much lower than what you initially thought. When comparing this to a debt management plan, you’ll find that the monthly proposal payments are much smaller than those required in the first 18 months of the original course of action. The original debt management plan only dealt with payday loan debt.

A cheaper alternative when you have significant debts and multiple payday loans is almost always going to be a consumer proposal. The reason being is that a proposal will allow you to make a deal for less than the full amount owing. It’s important to remember that a debt management plan will require you to repay 100 percent of the debt plus a substantial amount of fees. Your money problems can be solved with a consumer proposal if you have a good income and assets you would like to protect.

The person in this example ended up filing for bankruptcy based on the unique situation at hand. An unstable income can make it challenging to keep coming up with proposal payments that you owe. It wasn’t a choice that was taken or made lightly. It requires speaking to a Licensed Insolvency Trustee who can explain why this might be the best option and the benefits and consequences in detail. Licensed Insolvency Trustees are the only debt relief professionals who can provide a full range of debt solutions such as debt consolidation services, debt management plans, and consumer proposals.

Exploring Your Options

Are you swimming in a lot of payday loans and debt and aren’t sure how to proceed? We encourage you not to try to solve all your money problems yourself. It’s in your best interest to reach out and contact the experts at Bankruptcy Canada if you have complex debts and need to know the most feasible options for moving forward. Together, we’ll sit down and review your situation entirely so that we can design a plan that will be affordable and suitable for you. We can answer all your questions and help you get a fresh financial start.

It’s time to make a change if you’ve been dodging calls from creditors and collection agencies and want to be able to pay your bills on time and get your finances under control.

Information on Consumer Proposals

Consumer Proposals in Canada – An Alternative to Bankruptcy
What is a Consumer Proposal?
How to Amend a Consumer Proposal
What are the Benefits of a Consumer Proposal?
What are the Steps in a Proposal?
Consumer Proposal Eligibility
What Debts Are Erased in a Consumer Proposal?
Is There Life After a Proposal?

Canadian Bankruptcies

How to File for Bankruptcy
What is Bankruptcy?
Bankruptcy FAQs
How Does Bankruptcy Work?
What is the Cost of Bankruptcy in Canada?
How to Rebuild Credit Following Bankruptcy
Personal Bankruptcy in Canada
What Debts are Erased in Bankruptcy?

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