Dealing with Payday Loan Trouble
Payday loans can seem like a quick answer to your money problems. However, these loans can quickly result in serious issues. Payday loan trouble is common and, once you get into these issues, it becomes incredibly difficult to get out. That’s because payday loans are incredibly expensive.
Even though many provinces and territories have rules in place that limit the amount a payday lender ican charge, these loans tend to be much more expensive than nearly every other type of loan. For example, in Ontario, payday lenders are restricted to charging $15 for every $100 you borrow for two weeks at most. This doesn’t sound like much at first, but it means they can charge up to 15% interest for two weeks. Many credit cards charge about 20-25% interest annually. If you converted the payday loan rate to an annual rate, you wind up with 390% interest per year!
Of course, payday loans are not supposed to be annual loans. They are designed to be short-term loans that are there to “get you to pay day.” Unfortunately, many people who get a payday loan have trouble paying it back within two weeks. After all, if you need to borrow money to make ends meet, you’re likely living paycheque-to-paycheque and have no emergency savings. If you don’t have the money you need right now, will you realistically have it to pay back your loan in two weeks? And, even if you do, will you be short again in the future and need to get another payday loan? Unfortunately, this is the situation for many who get payday loans.
Payday loan trouble can often result in a vicious cycle of borrowing, paying back, borrowing more, paying back more, etc. Each time, you pay interest on the loan and each time you end up in a tougher and tough situation.
Here are some ways that you can solve payday loan trouble or avoid it in the first place.
Look for a Cheaper Loan
If you’re unable to make ends meet or if you’ve already taken out a payday loan and aren’t able to pay it back on time, it’s worth looking at a different option for solving your financial problem. As mentioned, payday loans can be very expensive.
Taking out a personal loan, using a line of credit, or even using a credit card can be more affordable options. You can take out one of these loans and use it to pay your bills or potentially even pay back your payday loan. However, it could be more difficult to get one of these types of loans in comparison to a payday loan. Payday loans are notoriously easy to get. They often don’t require a credit check, which is part of the reason they are so popular. If you want to get an alternative loan, it may take a bit longer to get the money you need. However, it could also save you a significant amount of money.
Adjust Your Budget
Paying back your payday loan should be a top priority once you get one. However, it’s also important to put yourself in a situation where you don’t need to take out a loan to handle unexpected costs. Both of these goals can be accomplished by adjusting your budget.
Look at how much you spend each month and where this money is going. If you don’t have a formal budget or if you don’t track your spending, you can get a lot of information about how you spend your money by looking at your credit and debit card statements.
Once you know how much you’re spending and where this money is going, you can make cuts. For example, if you’re spending a lot of money on takeout meals each month, consider cooking at home instead to save. If you can find several places to save, you’ll not only have the money you need to pay your loan, but adjusting your budget could also allow you to start saving money in an emergency fund so that you won’t need to use payday loans in the future.
Get Professional Help
If you are dealing with payday loan trouble or other debt issues, it can sometimes feel like there are no options. However, there are always solutions available. They will differ depending on your situation, but there are options out there. Speaking with a Licensed Insolvency Trustee can help you understand these options and give you the knowledge you need to make the right decision for your financial future.