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As the global pandemic and financial crisis continue, businesses and Canadians are coming together to help each other out – not payday loan companies though. Many lenders have lowered interest rates on loans. However, many payday lenders are still charging as much as they can. You may be thinking about a payday loan if you’re struggling to make ends meet right now, but the federal government says that should be your absolute last resort.
Touting easy approvals and fast access to cash, payday loans appear like a cheap, convenient, and sometimes, the only solution if you have bad credit. The truth is payday loans are the most expensive form of credit and can turn your financial trouble into a full-blown disaster. Discover the true cost of payday loans (it’s a lot more than you think) and a cheaper option that’s available to everyone of all credit scores.
Need quick cash without the risks that come with payday loans? Even if you have bad credit, you can apply for your e-transfer installment loan today!
1. Payday loans have exorbitant interest rates
Payday lenders are notorious for charging interest rates so high they’re considered predatory. Let’s say you take out a $100 payday loan in Ontario or British Columbia. Your payday lender charges you $15 for the loan, which means you need to pay back $115 by next payday. The $15 fee on a $100 loan may look like an interest rate of 15%, but crunch the numbers and you’ll see that it actually works out to an annual interest rate of 391%. That’s ten times more than what high-interest credit cards charge.
The cost of payday loan borrowing is even more staggering in other provinces. For example, payday lenders in Prince Edward Island can charge a whopping $25 for every $100 borrowed. That works out to an annual interest rate of 652%, yikes!
2. Payday loans charge hidden fees
Payday lenders are known to sneak in all sorts of non-transparent fees in the contract. If you don’t review your contract carefully, you may be on the hook for things like application fees, customer service fees, and charges for bounced checks. Contracts can also be intentionally confusing, which is why it’s important to be diligent and read the entire document before signing. If you must get a payday loan, make sure you understand all the terms and conditions and ask the lender for clarification if you’re unsure of anything.
Navigating a loan agreement on your own can be intimidating, but there are resources that can help. Non-profit organizations like Credit Counselling Society and Credit Canada offer free credit education and credit counselling services online or over the phone.
3. Payday loans run on short repayment periods
Payday loans in Canada usually need to be paid back in two weeks. If you think that’s not enough time, you’re not alone. Due to sky-high interest rates and hidden fees, many borrowers struggle to repay their loans in such a short period. It’s especially difficult for those already living paycheque to paycheque. When loans aren’t paid by the due date, borrowers get hit with late fees and may even resort to taking out another payday loan just to pay off their previous one.
These shady lending practices increasing your chances of getting trapped in a vicious cycle of debt. The longer the cycle continues, the larger your debt becomes. If you’re not careful, you may get to point where you pay more in fees than your outstanding loan. That’s exactly how one man’s $1,400 payday loan ballooned to more than $10,000.
Based on a $300 loan for 14 days, this diagram emphasizes the high cost a payday loan compared to a credit card cash advance, overdraft protection on a bank account, and borrowing from a line of credit. (Original Photo Credit: Financial Consumer Agency of Canada -- Interest rate comparison on a $300 loan for 14 days.)
What’s cheaper than a payday loan when you have bad credit?
You may not have access to a credit card or line of credit if you have poor credit, but that doesn’t mean your only option is a payday loan. A personal loan is much cheaper than a payday loan and easily attainable, even if your credit score is below average. Also known as an installment loan, a personal loan offers longer repayment periods, reasonable interest rates, and quick access to funds – just what you need when you’re going through a financial emergency and need cash fast. A personal loan can even help you build credit when used responsibly, something that’s impossible to do with a payday loan.
Save money with a personal loan from Spring Financial
At Spring Financial, you never have to pay astronomical three-digit interest rates or fork out money for hidden fees. Trusted by Canadians from coast to coast, the reputable online lender makes it easy to take care of emergency expenses by providing personal loans of up to $35,000.
Spring Financial is here for you:
- Cash when you need it: Watch funds hit your bank account on the same day or within 24 hours of applying.
- All credit scores welcome: You can still qualify for a loan with bad credit or no credit.
- Get approved from home: Online applications mean you never have to step foot in a bank or payday loan store.
- Lower interest rates than payday loans: Reasonable two-digit interest rates prevent you from falling into the debt cycle.
- Flexible repayment schedules: Choose a term that works for you, whether that be nine months or 60 months.
- Zero hidden fees: There’s no need to worry about things like application fees or maintenance charges.
Skip the payday loan shop and get approved for a personal loan without leaving your couch. Apply online or call 1-888-556-6441 to get started.
