In Canada, payday loans are a swift solution when you have an immediate crisis and need money fast. This type of loan, however, has the unfortunate drawback of extremely high interest rates and fees, which, if left unpaid, can lead to a downward spiral in your financial situation.
If you find yourself in this position, we are here to offer some sage advice and strategies on how to extract yourself from the payday loan trap. Read on to regain control of your finances.
Understanding The Payday Loan Cycle
These short-term loans give you quick access to emergency funds, but at a price. All amounts borrowed must be repaid at your next payday, along with high rates of interest and service fees. It is no wonder they are also referred to as high-cost credit!
It is precisely these high costs that make these loans challenging to repay, resulting in a roll-over loan that attracts further interest and fees! A veritable snowball effect can ensue. Read more about the difference between installment and payday loans here.
Chat To Your Lender
If you foresee that you will not be able to meet your debt obligations come payday, it is advisable to contact your lender as soon as possible. They may consider negotiating an extension or alternative repayment arrangements.
Debt Consolidation May Be Necessary
Consolidation programs are available in Canada that combine your debts into one personal loan with lower interest rates to simplify your debt situation and give you some breathing room to restore your financial balance.
Consider Financial Counselling
Professional financial counsellors can be consulted to provide customized advice and strategies to help you face your debt head-on and establish a way forward.
Creating an Emergency Fund
To avoid the debt spiral often associated with payday loans, starting a “rainy day” fund is essential. You can start with small contributions to a separate savings fund. Gradually, the fund will grow and even earn interest over time. Having this buffer is a great way to avoid relying on payday loans.
Upgrade Your Financial Knowledge
Take time to learn about budgeting, saving, investing, and debt management. The more you know, the better equipped you will be to make sound financial decisions.
Armed with the right attitude, information and dedication, businesses and families in Canada can break the cycle of payday loans. Apply online now for a fast, easy way to access an installment loan, or contact our team of consultants for top advice on improving your financial situation.