Clicking through the TV channels the other night, I was appalled by the number of ads for payday loans. They make is seem easy (it is). They show happy, smiling people and make it seem like a reasonable, temporary option (it isn’t).
Payday loans are easy to get, but they are about the worst decision you could ever make financially.
Here are the reasons why you absolutely NEVER, ever, ever get a payday loan.
1. Beyond High Interest
If you look at the amount they “charge” you, or deduct from one advance payment, it looks small … maybe even reasonable.
There have been instances where annual interest rates of 8000% have been changed. No, I didn’t accidentally add a few extra zeros … 8000%!
In BC the amounts that can be charged by loan companies are regulated. However fees can still range from $17 to $31 per $100 borrowed. $31 per $100 amounts to 754% interest per year!
If you keep on getting advances, you will soon be in a downward loan cycle that will never end. It will just keep on getting worse every month.
2. Too Easy to Renew
Once you qualify for the first money advance, it is very easy to renew every week or every month. You can even renew before you have paid back your last loan. If you thought you had problems paying off your credit card bills, this is even worse.
3. Your Credit Score Will Be Negatively Impacted
When it comes to calculating your credit score, the “type” of credit you have tapped into makes a difference. Payday loans have a huge and negative impact on your credit score.
What are your Options?
- Family or Friends? (pay them back immediately if you want to keep them by your side).
- Ask your employer for a one-time-only advance.
- Personal Bank Loan
- Even tapping into your Credit Card is better than a payday loan.
- Go into overdraft on your bank account can help temporarily. (My account lets me overdraft by $500 if I ever needed to).
- Get your budget under control.
- Take DRASTIC stop spending: measures NOW.
Another option is to consolidate your debt into your mortgage. With the new mortgage rules it has become harder to do this, but it is still possible. Give us a call to discuss your options.
Once you have consolidated your debt into your mortgage, we will advise you NOT to rack up additional consumer debt. If you continue spending, you will end up in the same place again … unless you take steps to control your money.