It is estimated that somewhere between seven and ten percent of Canadians use payday loans on a fairly regular basis to help make ends meet. It’s an understandable dilemma.
The rent is due and you don’t have the cash. You need to pick up groceries or pay for a car repair but you don’t have the money until your next pay cheque arrives. Taking out a payday loan sounds like a simple, quick way to help with the crisis. Unfortunately what is often seen as a one-time solution turns into an on-going debt cycle that is hard to break.
In fact, a study of those who we have helped break the payday loan cycle proved just that. Not only do one in eight debtors owe money to payday loan companies when they go bankrupt, they actually owe on average not one week’s pay but a full month’s wages. And most had multiple payday loans from more than one pay day loan company outstanding at the time.
Payday Loan Debt Help
Our slideshare summarizes everything you need to know about payday loans including:
- understanding the true cost of payday loans;
- payday loan regulations in Canada and Ontario;
- understanding your rights under payday loan legislation;
- discovering alternative borrowing and money management solutions;
- your payday loan debt relief options.
If you have questions, contact a trustee today by phone or email to discuss your options or make an appointment to talk to one of our licensed professionals.
If you owe money on payday loans, credit cards and other debts, it's time to find relief.
Below we discuss what steps you can take and what programs are available to consolidate or eliminate your payday loans, along with other unsecured debts.
Steps To Eliminate Your Reliance on Payday Loans
No matter how much help you need, one of the first things you should do is reduce the dependency on payday loans to pay your bills. You can do this by:
- Avoid taking out back to back payday loans, known as a payday loan rollover. It’s just too costly.
- If you need extra cash this week, look for alternatives to borrowing with a payday loan lender.
- Create a plan to manage your cash inflows and outflows. This may include making a budget if you are so inclined, or you can even try our easier no-budget budget as a way of making sure you have the money to pay your bills when they come due.
- Begin to build a small reserve fund for emergencies so you won’t be tempted by payday loans again.
Consolidating If You Need More Debt Help
If you are already in too deep with payday loans that you need help breaking the cycle, or owe other debts like credit card debts, you may need to consider ways to consolidate your payday loans and other debts into one lower monthly payment.
If you are relying on high cost payday loans you likely do not have good enough credit to qualify for a debt consolidation loan. There are lenders that will offer high cost loans to consolidate multiple payday debts into one however it is unlikely this will provide a real solution to your financial problems.
You should also know that payday loan lenders will not participate in a voluntary debt management program through credit counselling agencies.
This leaves you with two main consolidation options in Canada:
- A consumer proposal will consolidate AND settle all of your unsecured debts including your payday loans. You pay back less than you owe and make one single payment until your proposal term (usually up to 5 years) is completed.
- If you cannot afford a consumer proposal, you may, as a final resort, want to consider declaring bankruptcy.
If you are continuously relying on payday loans, it’s time to look at your alternatives. Contact us and we can help you review your options.
Payday Loan Regulations and Your Rights
If you have used payday loans and may be tempted to do so again, it's important that you understand your rights under payday loan law in Canada.
- While the Criminal Code of Canada limits interest rates for any lender to 60% per year, payday loan companies in Canada are also regulated by provincial legislation.
- In Ontario, payday lenders must be licensed by the Ontario Ministry of Consumer Services and are governed by the Ontario Payday Loan Act.
What Can Payday Lenders Do?
- Ontario law limits the maximum cost of borrowing for one payday loan to $21 for every $100 borrowed.
- Rollovers are prohibited meaning a payday lender cannot grant you a second payday loan until the first has been paid off.
- You have a cooling off period of two days to change your mind at which time the lender must cancel the arrangement at no cost to you.
- You must be provided with a contract that clearly states the amount borrowed, how long the loan is for, the total amount of fees and charges and the date the loan is due.
- The lender must give you the full amount of the loan up front. So if you borrow $500, you must be given $500.
- You cannot be required to make any payments, either fees or loan repayments, before the due date.
Never deal with a payday loan lender that is unlicensed or does not comply with the above requirements.