Payday loans are an increasingly popular loan option for many people. They’re so popular, in fact, that payday loan locations are open in nearly every major city in Canada, promising instant cash so long as you give them a post-dated cheque or other financial commitment.
The catch with these loans, of course, is that if you don’t pay them back in time you can be facing exorbitant levels of interest.
For many, they deal with this by simply taking out another payday loan, sometimes from another vendor, to pay down their original payday loan.
This practice, known as rolling over loans, can snowball and leave you deeper in hock to the lender. And, worse still, the amount will increase, since payday lenders can charge annualized interest rates of 600% or more.
If you don’t repay down your loans, they’ll also in many instances charge a penalty for not meeting the payback commitment. And then, as mentioned, comes the heavy interest rates. Meanwhile, your original bank may charge you with an NSF fee (cheque bounce fee) if the payday lender tries to cash your original cheque to them and you don’t have enough funds in your account.
So how do you get out of this?
One of the best ways is to consolidate all your debts, as this will help you dramatically reduce your exposure to the excessive interest rates that payday lenders charge. Kevin Thatcher and Associates specialize in debt consolidation, so the first thing you should do if snowed-in by payday loans is contact us to book a consultation. We’ll guide you through your options and explain how you can get out of debt.
In the meantime, follow the following tips to help better your situation:
- Pay back the loans as soon as possible. This means prioritizing your loans over all non-necessary expenditures (such as rent and food). The sooner you erase the debt the more money you will save, and the lower your stress level will be.
- Try not to panic. The fact is, many Canadians experience exactly what you’re going through. So don’t blame yourself – simply learn from your mistake and use that knowledge going forward.
- Reduce your expenses. You’ll have to start living within your means, even if that means giving up certain aspects of your social life and not spending a dime that isn’t absolutely necessary for your life. Draw up a budget to help you find savings, and put those savings to your payday loan debt(s).
- Make sure your cheques to the payday lenders don’t bounce! As said before, NSF fees can add salt in the wound of having an unpayable payday loan obligation.
RESEARCH SOURCES:
http://www.urloan.com/payday-loan-trap/
http://www.debtcanada.ca/library/pay-day-loans