Pay Day Loans are Rarely a Good Idea
At one time or another, most people have found themselves a little short on cash before payday rolls around but are Pay Day Loans the answer?
Four Pitfalls of Pay Day Loans
Many people live pay cheque to pay cheque, with very little left over for unexpected expenses. That is the reason you see Pay Day Loan Stores popping up everywhere. It can be tempting to apply for a payday loan as a quick fix to make ends meet – but this is rarely a good idea.
Here are 4 reasons why:
1. High interest rates.
Payday loan companies advertise it only costs $15 or $20 per loan. It is important to understand that this is based on a fixed fee per $100 loan, and contingent on repayment within a two-week window. This means a loan of $500 could cost you an extra $100 at the end of your pay period – and that’s IF you pay on time.
2. Increasing interest.
Payday loan companies can increase their interest amount. If you are unable to fulfill your obligations under the loan right away, those interest rates can skyrocket, making them even more difficult to pay off.
3. Increased financial strain.
If you are considering a payday loan, chances are you are already pushing your financial envelope. Adding the stress and pressure of a high interest loan can only add to your problems and make it harder for you to get on the right side of your budget.
4. Multiple payday loans.
Payday loan can be obtained with just a recent pay stub. Be cautious of getting in a cycle of borrowing from several different companies to make ends meet. This can cause a disastrous debt situation in a very short time. What begins with one high interest loan for a few hundred dollars can quickly turn into several thousand dollars in debt.
What’s the alternative to a Payday Loan?
If you are in financial distress it’s important to evaluate your financial situation and take steps to improve your fiscal well-being for a longer-term solution.
Meeting with a Licensed Insolvency Trustee is an important part of the debt solution process. Whether your circumstances call for debt counselling, consumer proposal or filing for bankruptcy, our friendly and experienced team at D Thode & Associates Inc. can help get you back on your feet.
D. Thode & Associates Inc.
1980 Cooper Rd. #220 Kelowna, BC V1Y 8K5