Why You Should Avoid Payday Loans : Advice on Avoiding Payday Loans
Avoiding Payday Loans
Payday loans are a very attractive prospect when you need cash in a hurry.
They often don’t carry out a credit check and you can get the money in your bank account in a matter of hours.
If you are a little short at the end of the month and you have a few bills that you need to pay, you might decide that you will get a payday loan to tide you over until you are back on your feet again.
However, the reality of payday loans is very different and they almost always cause a lot more problems than they solve.
People assume that they are making a sensible financial move because they are not missing any bills and incurring late fees.
But even though you have good intentions, the interest rates on the payday loans can quickly add up and land you in some serious financial trouble.
If you are in a difficult financial position and you are looking for a way out, you should avoid payday loans at all costs.
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The True Cost of Payday Loans
The interest rates on payday loans are ridiculously high when compared with any other form of borrowing.
If you borrow $100 from a payday lender for two weeks, it will cost you around $20 in interest.
That’s 20% interest in a fortnight and over the course of a year, you will pay 520% interest on that loan.
Now imagine that you borrowed $1000 and you’ll see how easy it is for the interest payments to build up on you and land you in trouble.
But most people don’t think that they’ll get into that situation because payday loans are meant to be short term, so they assume that they’ll borrow the money for a week or two and then pay it back.
The thing is, it never usually works out this way.
If you had to rely on a payday loan to cover your bills, it is unlikely that you have emergency savings and all of your income is spent on bills and expenses.
So, where is the money to repay the payday loan going to come from?
Even if you are able to pay the loan back, you are still in the same financial position that you were a few weeks ago, so it is likely that you will fall short this month as well.
In a lot of cases, this leads to a cycle of payday loans and the huge interest rates put you further and further in debt and you end up borrowing more and more each month.
Payday loan companies thrive on this and the loans are designed to trap you in a cycle of debt.
There is also an emotional cost to payday loans as well.
When you are trapped in a monthly debt cycle, only just keeping your head above water, it has a huge impact on your mental health.
All of the extra stress can eventually lead to serious issues, like depression and anxiety.
It can also lead to relationship issues as well, so it is important that you avoid payday loans at all costs.
Payday loans are not a long term solution to money problems, they are a band-aid solution.
They cover up the problem until next month, when you have to get another loan and the underlying financial problems only get worse.
If you are going to sort out your financial problems, you need to avoid payday loans and look at the alternatives.
Alternatives To Payday Loans
There are so many other ways that you can deal with your financial issues, so you need to avoid payday loans and explore your other options.
In some cases, reviewing your budget and making some cutbacks can help you to get things back on track.
However, if your situation is more difficult and you are already in a lot of debt, you need to consider debt relief options.
There are a number of debt relief options that are far more effective than payday loans or declaring bankruptcy.
Debt settlement programs and consumer proposals allow you to agree to pay a lower amount to creditors and then write off the rest of the debts.
Consolidation loans can help you to reduce the amount of interest that you pay as well.
If you are in a difficult financial position, get in touch with us today to discuss your debt relief options.
You can reach us on the phone or fill out an evaluation form and we will get back to you.
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?
How to File for Bankruptcy
What is Bankruptcy?
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?