Payday loan debt relief
Break the payday loan cycle and get out of debt
We can help you escape the payday loan debt cycle and give you a fresh start
Caught in the payday loan trap?
We’re sorry to hear you’ve been caught in the payday loan trap. Payday loans are easy to obtain but if you’re not careful, these seemingly harmless loans can wreak havoc on your finances. There are several payday loan debt relief options for you that can help you get out of the never-ending high-interest payments.
The payday loan story usually goes like this:
You incur a large, unexpected expense, maybe a car repair bill. Your bank account is nearly empty, and you have few options to acquire extra cash. So, you apply for a payday loan to help you get by until your next paycheque arrives.
But something comes up, and you cannot repay the borrowed amount. As a result, you apply for another payday loan from a different lender. This vicious cycle continues until you’re stuck with multiple loans, leaving you unable to repay your debt. And that’s what a payday loan company wants, as they make a fortune off the interest they charge you.
If you’re drowning in payday loans, we don’t blame you for feeling helpless, anxious, and frustrated. Luckily, there are various options available in Ontario to reduce or eliminate your debt legally. One of these is a government-sponsored program that can reduce your balance owing by up to 80%!
Our team of Licensed Insolvency Trustees at David Sklar & Associates can help you determine the best way to achieve payday loan debt relief. Contact us to discuss your options to gain financial freedom today.
How payday loans work – and why they can quickly lead to severe debt problems
A payday loan is a short-term loan issued by private companies to everyday borrowers. Individuals use them mainly to cover a temporary cash shortfall.
You only need to present the lender proof of income, home address, and a bank account to qualify for one. Once approved, the lender provides you with cash or deposits the funds in your bank account. You can borrow up to $1,500.
You must repay the debt when you receive your next paycheque, which is why they’re called “payday” loans.
On the surface, payday loans look like a convenient way to get a hold of emergency cash. However, the sky-high interest rates they charge make them dangerous.
You can pay an interest rate of 300% - or more!
The Criminal Code of Canada prohibits lenders from charging borrowers more than a 60% annual interest rate. However, this law doesn’t apply to lenders issuing payday loans. In Ontario, payday loan lenders can legally charge you up to $15 per $100 you borrow over two weeks. Annually, this works out to an interest rate of 390%!
However, this rule applies if you only repay your loan on time. If you fail to do so, the lender can tack on additional fees and interest charges. Thus, your balance owing can snowball fast.
And it gets worse. If enough time passes by, your lender may
- Send your account to a collection agency
- Pursue legal action against you
- Seize your property
- Garnish your wages
Payday loan regulations in Ontario – know your rights
Payday loan companies are regulated primarily at the provincial level. All lenders who wish to offer payday loans in Ontario must hold a license from the Ontario Ministry of Consumer Services. They must also observe the rules under the Ontario Payday Loans Act.
Here are some of the rules that payday loan lenders in Ontario must follow:
- The maximum cost of borrowing cannot exceed more than $15 per $100
- You’re allowed to cancel your loan within two business days – the lender cannot charge you any penalty for doing so
- “Rollovers” aren’t allowed – this means you can’t apply for a second payday loan with the same lender until you repay the first one
- The lender must include specific details in your contract
- The amount you’ve borrowed
- The number of days the loan is issued for
- The amount you must pay to borrow the money
- The payment due date
- The lender cannot contact your more than three times per week to collect a past-due debt
- The lender cannot lend you an amount per loan that exceeds 50% of your net income.
You can file a complaint if you feel a payday loan lender has violated a rule.
How to achieve payday loan debt relief through debt consolidation
Debt consolidation can help you settle your payday loans. It involves combining your existing debt into a single payment plan with a cheaper interest rate.
There are two ways to go about merging your debt:
- Acquiring a debt consolidation loan
- Filing for a consumer proposal
Debt consolidation loan
A debt consolidation loan is usually a personal loan offered by a bank or credit union.
The key advantage of a debt consolidation loan is its much more affordable interest rate than a standard payday loan. The result is much more manageable payments, allowing you to pay off your balance sooner.
However, the drawback is that you must still repay the entire loan. If you lack the money to do so, you’ll fall behind again, allowing interest charges to accrue. Also, if your credit is poor, you won’t qualify for a favorable rate.
Payday loan debt relief with a Consumer Proposal
We’ve helped thousands of Canadians reduce their credit card debt with a Consumer Proposal.
Take a moment to learn about the benefits of consolidating your debt with a Consumer Proposal. Our team of Licensed Insolvency Trustees will help you every step of the way.
A consumer proposal is an insolvency program offered by the Government of Canada. It’s a legal debt settlement that enables you to consolidate your unsecured debt under a new payment plan. As a government-sponsored program, only a Licensed Insolvency Trustee can administer it on your behalf.
Under the guidance of your trustee, you’ll have the opportunity to negotiate a new repayment plan that’s affordable for you but also fair for your creditors. A consumer proposal may discharge up to 80% of your debt, leaving you with a much smaller balance to pay off.
In addition to drastically reducing your payday loan debt, a consumer proposal will also
- halt all interest charges
- prevent your creditors from taking legal action against you
- Protect your assets from repossession
Use our handy consumer proposal calculator to see how much you can save.
Eliminate your payday loan debt through bankruptcy – but only as a last resort
Bankruptcy is another federal government program geared toward helping Canadians discharge their debt. Like a consumer proposal, it stops wage garnishments and lawsuits and freezes interest charges.
The primary difference is that filing for bankruptcy absolves you of most, if not all, of your unsecured debt. Essentially, you formally declare to your creditors that you lack the financial means to honour your debt obligations. Once you complete bankruptcy proceedings (with help from a Licensed Insolvency Trustee), you’ll emerge debt free, allowing you to rebuild your finances.
Bankruptcy may seem attractive and convenient to eliminate payday loan debt. However, it’s not without consequences. If you proceed, you’ll have to surrender much of your assets to creditors, including possibly some of your home equity.
What’s the best way to get rid of payday loan debt?
If you’re already on the hook for a few payday loans, breaking your dependence on them as soon as possible is wise. Cut back on your spending, seek cheaper financing alternatives, and gradually repay your balance over time. Take steps to create an emergency reserve fund, too, so you won’t have to rely on a payday loan to bail you out when you’re low on cash.
Still, that only prevents the problem from worsening – what if your balance owing is far too high for you to handle already? In that case, a consumer proposal may be the ideal option to lighten your debt load. By drastically reducing your balance, you can confidently work to pay off your debt – and avoid paying 300% or more in interest charges!
If you’re dead set on ending your payday loan debt woes, contact us for a free, no-obligation consultation. We’ll review your situation to determine the best way to settle your payday loans – and let you begin your journey toward a brighter financial future.
Advice on Payday Loan Debt
Getting into debt is easy. Getting out is a different story.
But it's still possible!
Did you know there is a Canadian debt relief program federally regulated by the Canadian Government, designed to help citizens avoid claiming bankruptcy? This amazing program can only be administered by a Licensed Insolvency Trustee (LIT).
If you’re struggling to make your payments every month and creditors won’t stop calling, we can help.
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We are David Sklar
Our team of Licensed Insolvency Trustees in Ontario can help you get out of debt and in control of your own financial future. We’ve helped thousands of people and we can help you too.
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It’s going to be okay.
Book your free consultation today. We’ll do the rest.