Five Reasons to Avoid Instant Payday Loans
No matter how strapped for cash you are, it is in your best interest to avoid taking out a payday loan. Emergencies typically occur when you are least prepared for them, and if this is the case, the best thing you can do for yourself – and your finances – is to avoid taking out a payday loan. You can get instant same-day payday loans from a large number of direct payday lenders and online payday loan lenders these days. There are many online payday loan lenders.
The idea behind payday loans is not overly complicated; you take out a loan for the amount of money you require, in addition to an additional cost, and you repay the loan along with the fee when you receive your next paycheck. A payday loan won’t do you much harm as long as you don’t make it a habit of turning to these quick loans every time you’re short on cash and as long as you can pay back the loan before your next payday and you don’t mind shelling out the additional fee. However, if you do make it a habit of turning to payday loans whenever you’re short on cash, it will do you more harm than good.
If you aren’t careful, taking out a payday loan can put you in a lot of financial trouble very quickly. Payday loans are a convenient way to get fast cash because there is no credit check and there is no application process. However, if you aren’t careful, taking out a payday loan can put you in a lot of financial trouble. Take a time to think about these reasons to avoid immediate payday loans if you are considering getting a payday loan in Canada, or if you have contemplated getting a payday loan in Canada in the past.
Quick Payday Loans Come With High Interest Rates
One of the primary reasons why you should avoid getting a payday loan has to do with the extremely high interest rates that are associated with them. These interest rates are frequently higher than the interest rates that are associated with personal loans and credit cards.
The majority of payday lenders charge a fee, which can range anywhere from $15 to $30 per every $100 that is borrowed. For instance, if an individual took out a $100 payday loan, they would be required to repay $115 by the time they received their next paycheck. If you borrow $100 for a fee of $15, it may look like the interest rate is 15%, but when you do the math, it’s actually equivalent to a 390% annual interest rate, which is more than 10 times the typical rate on a high-interest credit card. If you borrow $1,000 for a fee of $15, the interest rate is a staggering 390%.
Although payday loans are supposed to be a temporary solution for people who need cash quickly, the fact of the matter is that many borrowers are unable to repay the full amount due to the high interest rate on the loan as well as the short turnaround time (borrowers have until their next payday to repay the loan). Many borrowers choose to continue making payments on their loan rather than defaulting on it. In some instances, the loan is renewed such a large number of times that the borrower winds up paying almost as much in fees alone as the principal amount of the loan they took out.
Payday Lenders Charge Costly Fees
Because of the speed with which these simple loans are processed, the borrower frequently finds themselves unable to repay the money when the due date for the loan finally arrives. The borrower is now faced with two choices as a result of this development: the borrower can choose to default on the loan and run the danger of having the balance sent to collections, or the borrower can choose to pay an extra charge in order to roll over the loan for an additional two weeks. These fees are still another reason to steer clear of payday loans, as we will see in the following paragraph.
The majority of organizations that provide payday loans charge an additional fee on top of the existing debt if the loan is rolled over. If you take out a $100 same day loan, which ends up being a $115 loan with the initial fee, and you choose to renew the loan because you can’t pay off the payday loan by the time you get paid again, you can expect to owe approximately $130, depending on the cost of the renewal fee. This is an example of how our previous example works. If you take out a $100 same day loan, which ends up being a $115 loan with the initial fee.
A situation that initially appears to have a simple solution and a debt load that is reasonably easy to handle can rapidly deteriorate as a result of the accumulation of fees. The larger the amount of the loan, the more challenging it is to pay off the loan in its entirety. As a result, the borrower is left with no choice but to continue renewing the loan and accumulating more debt as the loan amount continues to rise.
People who aren’t able to repay their loan in full frequently find themselves stuck in a never-ending cycle. Either they have to keep rolling over their loan or they end up taking out another payday loan from a different loan lender in order to pay off the one they already have, which is a topic that will be discussed in greater detail in the following section.
Relying on Fast Cash Can Lead to a Debt Cycle
Even though the majority of payday loans in Canada are required to be repaid within a period of two weeks, reports have indicated that the average payday borrower stays in debt for a significantly longer period of time than is required. The high rates of interest and costs associated with payday loans make it simple to get stuck in a never-ending cycle of either extending the term of the loan for an additional two weeks or taking out a new payday loan in order to pay off the previous ones.
Take, for instance, the scenario in which you suddenly find yourself in need of two hundred dollars in cash. If you have exhausted the available credit on your credit cards and do not have sufficient funds in your checking or savings account, you can obtain the cash you need from a payday advance lender. You pay a fee, but the money is given to you on the spot, which provides you with a momentary sense of comfort. But when payday rolls around, you realise that you are not going to have enough money to cover your regular expenses in addition to the cost of the loan.
Therefore, you make an additional payment in order to extend the loan, which you intend to pay back by the time you receive your next paycheck. However, by this point in time, the total amount that you owe has grown, which makes it an even greater challenge to pay off the loan in its entirety. You do this by extending the loan one more time in order to buy yourself some additional time to pay off the loan. And this is how the never-ending cycle of debt begins. As the cycle continues, your debt will continue to increase, and there is a possibility that it will reach a point where you owe more in fees than you do on the actual loan total.
Getting your hands on cash quickly typically comes at a cost, in the shape of exorbitant fees and interest rates. This approach to obtaining financial assistance can become rather pricey, particularly if you have formed a pattern of relying on payday loans simply to cover your day-to-day costs of living expenses. It’s possible that getting a payday loan will help you get out of a financial bind, but keep in mind that this is merely a stopgap measure for a more significant issue that’s been building up.
Making Payday Loans Your Primary Source of Funding Encourages Unhealthy Financial Behavior
The application process for a payday loan is quick and simple, but the money you borrow should only be seen as a stopgap measure rather than a permanent solution to your ongoing financial issues. Obtaining payday loans can simply help you develop unhealthy saving and spending habits, which will lead to future financial difficulties if the underlying problem is not fixed first.
It might not appear to be a huge thing to take out a short-term cash loan for an emergency, but the fact of the matter is that an increasing number of individuals are doing so in order to fund day-to-day living expenditures like rent, utilities, and groceries via short-term payday loans. This kind of borrowing is especially dangerous since the more acclimated you become to taking out quick cash loans whenever you need money, the less likely it is that you will learn how to properly manage your finances and you will end up in a worse financial situation as a result.
The ability to keep track of one’s finances, create and stick to a budget, and set aside money for unexpected costs are all essential components of achieving financial independence. If you’ve been getting by with a few payday loans here and there to get by, an unexpected occurrence like the loss of your job, a sickness, or significant house repairs can really put a dent in your finances. The risk associated with this is that you can end up having to take out payday loans to cover not just the unexpected expense but also your regular bills, which might put you in a vicious cycle of debt that is difficult to escape from.
If you find that you need to take out payday loans in order to fund your essential costs, this is a red flag that indicates your financial situation could use some improvement. If you find yourself in a financial bind and need money, it might be in your best interest to consult with a credit counsellor rather than resorting to payday lenders. The majority of the time, we find ourselves in need of a payday loan because we are unable to properly manage our finances, including maintaining a budget, saving money, and living within our means, all of which are skills that may be taught by a qualified credit counsellor.
Avoid Going to Direct Payday Lenders Because There Are More Affordable Ways to Get Cash There are More Affordable Ways to Get Cash, So Avoid Going to Them
There are some people who are unaware of the fact that pay check loans do not necessarily have to be a solution to financial difficulties; rather, it pays, quite literally, to investigate other options. To begin, it doesn’t hurt to ask your creditors if they are willing to extend your due date if you have a good relationship with them. This is especially true if you have a decent relationship with your creditors. Call them up as soon as possible and let them know that you won’t be able to make the payment on time if you already know that you won’t be able to. If you ask, the majority of your creditors will be ready to work with you to either extend the date by which your payment is due or to set up a payment arrangement that would allow you to make a number of smaller instalments over time.
One other choice you have is to discuss the possibility of getting a wage raise with your employer. If you work for a small business that has flexible policies, your employer may be willing to give you a payday advance. This is similar to getting a payday loan in principle, but you won’t have to pay the exorbitant fees that come along with it. However, you also need to keep in mind that getting a payroll advance will result in a reduction to the amount of money you receive on your subsequent paycheck.
One additional way to acquire short-term loans is to borrow money from members of your family or from close personal acquaintances. You’ll have to get over your pride and ask for assistance from individuals who are close to you, but the cost won’t be nearly as high as it would be if you went to a payday lender. However, borrowing money from a close friend or family member might be challenging due to the potential for irreparable harm to the connection if the debt is not repaid in accordance with the terms of the loan. If you do decide to borrow money from family or friends, you should approach the matter with the same level of seriousness with which you would approach repaying a business lender or the bank.
If you have a credit card with a balance that is available to you, you have the option of either taking out a cash advance or using the card to pay for the unexpected expense. Taking out a cash advance on your credit card will result in lower overall costs than getting a payday loan, despite the fact that you will still be required to pay a charge and interest for the privilege. Keep in mind that cash advances typically come with very high interest rates, averaging around 30% per annum. Because of this, you should avoid charging anything else on your credit card and make sure to pay off the balance as quickly as you can.
If you’ve tried all of these different things and you still don’t have enough money, it’s time to take a look at your spending habits and create a budget. You can decrease your monthly expenses by cutting back on things such as food and groceries (by bringing your lunch to work or substituting meat for a less expensive protein like tofu or eggs), minimising transportation costs (by taking public transit, carpooling, or running errands on a single trip to avoid unnecessary driving), and scaling back on entertainment (by borrowing DVDs from the library or hosting a games night in place of going to the movies). Here are some other methods that you might cut costs and get out of debt.
You might want to think about putting in overtime hours at work or finding a second job in order to further increase your flow of cash. Not only will the boost in income make it easier for you to repay the payday loan, but it will also make it simpler for you to begin saving money so that you won’t have to resort to payday loans in the future. You can make money off of people if you have a hobby or a skill that is in high demand, such as photography or baking, and if you provide your skills to them in exchange for money. Additionally, if you have a garage full of household items that you no longer need, you may sell them on websites such as Craigslist or Kijiji provided you have an account with either of those services. You will not only have access to a source of income, but you will also make progress in decluttering your home in the process.
One further choice that should be taken into consideration is to seek assistance from local resources. There is a purpose for the existence of food banks and soup kitchens in communities: they are there to assist those who are in a difficult financial condition and are having trouble making ends meet. If you find yourself in a position where you require assistance, these resources are available to you. A lot of other people have already used them when they were in a similar predicament as you are now. If obtaining a meal from a soup kitchen or some canned goods from a food bank can save you an additional $20 or so to assist you in paying off payday loans, then it is without a doubt a decision that should be made by you.
It takes patience, careful planning, and unwavering commitment to break the cycle of relying on payday loans.
It is not difficult to obtain a payday loan in the modern era, whether the loan is obtained from a traditional lender in a physical location or through a website that provides online payday loans. When it comes to dealing with financial difficulties, however, it is essential to keep in mind that there is no easy way out of the situation. If you take out a single payday loan and are able to repay it in full, along with any fees associated with it, by the time you get paid again, you won’t be thrown into a financial crisis as a result.
Payday loans, on the other hand, are frequently renewed and carried over into subsequent loans, which can lead to an endless cycle of additional borrowing. If you want to put an end to the cycle of having to take out payday loans, the first thing you need to do is examine the circumstances under which you found yourself in need of such loans in the first place. You will have made progress toward figuring out how to get out of payday loans once you have discovered the solution to the question posed above.
The Best Way to Get Payday Loan Help.
Making an appointment with a credit counselor who is accredited and works for a non-profit organization is the most effective approach to seeking assistance with problems related to payday loans. Obtaining a payday loan is a short-term fix for what is frequently an ongoing monetary issue, and you should develop the ability to solve your financial issues without resorting to such measures in the future. A credit counselor will be able to assist you in determining which aspects of your financial situation require improvement and reorganization so that you may maintain your current payment schedule while still covering your essential costs. In addition to assisting you in putting together a budget, a credit counselor will provide you with information regarding the steps you can take to permanently avoid the use of payday loans, and they will also provide you with a variety of options to help you get your financial situation back on track.