It should come as no surprise that, given the impact that COVID-19 has had not only on the economy but also on our professional and personal life, there has been a significant increase in the demand for payday loans over the past year. A summary of the benefits and drawbacks of payday loans, your available options, and how we can be of assistance is provided below.
What is a payday loan?
A payday loan is a type of short-term, high-interest loan that is often given by private enterprises (as opposed to banks or other types of financial institutions) and typically does not exceed $1,500. You are required to make the repayment of the loan within a period of around 62 days, in the majority of circumstances.
Nevertheless, the laws that govern these loans are extremely variable across the country of Canada, with Quebec having some of the most stringent regulations, which makes it challenging for huge payday lending companies to operate there.
What is it that makes them desirable?
The application process for payday loans is typically extremely simple. You won’t be required to put up collateral like you would be at a bank; as long as you have a steady salary, a permanent address, and a bank account, you should have no trouble finding someone to give you money.
Payday loan firms can also be found virtually anywhere, including online and in virtually any community. Because loan firms are normally regulated by the province and are required to have a license to operate, they are not free to charge you whatever fees or terms they want because they are required to have those licenses.
You can typically cancel your loan within a cooling-off period of approximately forty-eight hours after it has been approved. You might be thinking about getting this kind of loan so that you can provide your family with food or pay for other essentials.
What are some of the drawbacks?
To put it simply, they are quite pricey. The actual cost of the loan can be extremely high even if there are caps placed on the fees that the lender is allowed to charge you. For every $100 that you borrow, for instance, you might have to pay anywhere from $15 to $25 in interest in most provinces.
The costs might quickly build up if you take out many payday loans over the year. Using payday loans as your primary source of financing might put you in a never-ending cycle of debt that is tough to escape.
What are the consequences if I am unable to repay a payday loan?
If you do not repay your loan, the lender may have several options available to them, some of which include charging you even more fees, having your wages garnished, selling your loan to a collection agency, and suing you, amongst other actions that may be available to them depending on the regulations in the area in which you live.
All of these things have the potential to have a negative impact on your credit score, as well as your quality of life, and put you in a downward spiral of debt. Nothing about this is positive.
Okay, you’ve got me sold. But I really need some money. What are my other potential courses of action?
It might be challenging to say no to the convenience of a payday loan, especially given the fact that you can obtain one either online or in person. As was indicated before, there are not many obstacles to overcome in order to obtain one; nonetheless, the fees might be pretty expensive. You have choices, and we are here to assist you in making the determination of which one meets your requirements. There are several alternatives to getting a loan from a payday lender:
- Release from the effects of COVID-19. There are other rules that can help, such as required rent freezes, postponed credit card payments, and lower interest rates. In addition to the government programs that are available for covid-19 aid, there are other regulations that can help. Because the specifics might vary greatly and shift at a moment’s notice, it is important to consult with someone about what might be accessible to you in your area.
- Invoice management. Create a strategy, and then approach the firms to see if you can get a payment extension or perhaps a payment plan that allows you to pay them back over a period of time. There are also options available to you if you are looking for a loan to pay off your credit card debt. We can advise you.
- Personal loan. There is no denying the fact that these, too, are loans; however, the interest rate will be reduced, and the repayment period will be stretched out over a longer length of time.
- A sense of community. There are typically a number of local organizations available to assist you if you need assistance with more immediate requirements, such as acquiring food or clothing.
- Government. It’s possible that you could qualify for assistance that you are not currently aware of. Those who are in need of some assistance can apply for one of the numerous forms of aid that are offered by federal, provincial, and local governments. One example of this type of assistance is Ontario’s short-term financial assistance.
- Economy based on customer demand. Consider making face masks, assisting people in your community with their household responsibilities, driving or delivering people or goods, making face masks, selling things you no longer need in the markets – and offering to help others sell their stuff, too – if you are able to do so safely and if you are able to do so safely.
Cash advances on credit cards. Even while getting a cash advance on a credit card typically isn’t a good idea due to the high fees associated with it, there are some situations in which it could be an option to explore.
What you really must keep in mind
Although payday loans are available and simple to obtain, you will be required to pay a fee for the convenience of the loan at a time when you should be searching for ways to reduce your expenses rather than increase them.
You have choices, and we are able to advise you on what kinds of possibilities are available in your area and which courses of action would be most beneficial for you and your family as a whole. Contact us. You can reach us at any time at http://www.georgia-ssbci.org.