Payday Loans and Holiday Debt

Tuesday, January 3, 2017 - 23:50

Money Management


With Christmas bills about to roll in, I thought now would be a great time to talk about why getting a payday loan is a terrible idea. I understand why people are interested in the idea. It’s a quick fix…or is it? Before you take the plunge into the payday loan cycle, do your research. Trust me, if you can’t afford to pay your bills, getting a payday loan is not the way to go.

The way a payday loan works is that the borrower usually takes out a fairly small loan and usually pay it back by their next pay day (hence the term “payday loans”. These lenders have made it very easy for unfortunate debtors to get these loans. For the most part, lenders just ask that you can prove that you have three months of continuous employment, have a proof of address and have a chequing account. That’s it. Easy peasy. Sounds great so far. Well, here’s where the issues arise.

Payday loans are expensive. They should definitely not be your first borrowing option. These lenders can charge up to $21 for every $100 you borrow. That’s an obscured amount of money. Not only that, but payday loans usually result in a “never-ending cycle”. The fees that go with payday loans accumulate quickly and many people end up taking out a second payday loan just to pay for their first one.

With the holiday bills on the horizon, it’s inevitable that people will panic. Many people are going to be looking to payday loans to get them out of a jam. I encourage you to re-evaluate your budget and if you are still struggling, look for other ways to borrow money. Ask family, friends, banks, etc.