Payday Loan Facts
One of the strongest financial danger signs is the repeated use of Payday Loans.
While we sympathize with the desperation that can lead people into taking out Payday Loans, we want to make it very clear how poor a credit choice Payday Loans are.
What are Payday Loans?
Sometimes called Cheque Cashing Services – Payday Loans are short-term, unsecured loans that usually require the borrower to give the lender a post-dated cheque or a pre-authorized debit to cover the loan and the fees/interest charged on the loan. Loans are usually for 1 to 14 days in length.
Under the Ontario Government’s Payday Loans Bill of Rights, the Payday Loan industry can charge up to a maxim of maximum of $21 (fees plus interest) for each $100 that a consumer borrows. Payday loans are for periods of up to 14 days, which means that the annual cost of borrowing $200 (14 days x 26) would be $1096 – equal to 546% per year!
Scary News from Statistics Canada
According to Statistics Canada* in 2005 – 353,300 families reported taking out a Payday Loan in the previous three years.
This truly frightening statistic indicates there are many Canadians who are desperate for cash at any cost and many who do not understand how poor a credit choice they are making.
Avoiding Payday Loans
Part of avoiding Payday Loans, is to get your finances under control. The most effective ways to do that is to set up a realistic budget, build up an emergency fund, and stick to it.
Check out our free series on how to set up a budget. It will help you get started on your way to financial stability.
Knowing the true costs of Payday Loans – may be one of the best incentives for getting your finances under control.
Trapped in Payday Loans?
If you are trapped in the Payday Loan cycle, can’t see a way out, and live in the GTA – it might be time to speak to one of the Licensed Debt Professionals™ at David Sklar & Associates. We offer a free initial consultation where we will review your current financial situation and explore all of your debt-removal options. Call 416-498-9200 to book your free consultation at one of our six GTA offices.
* Statistics Canada – http://www.statcan.gc.ca/pub/75-001-x/10407/9617-eng.htm