The holidays are fast approaching. In fact, many of us have already started shopping or at least thinking about it. Perhaps this year you are a bit strapped for cash, and since you can’t just fast-forward to January and not spend a cent, getting through without a little help is probably not in the cards. If you’re thinking that you just need one or two thousand dollars to get you through the holidays, and maybe a payday loan is a safe bet, we urge you to stop that line of thinking!
Many Canadians, especially around the holidays, spend outside their typical monthly budget. Many turn to savings or credit cards for this spending – but if that isn’t an available option, some individuals turn to payday loans. Here is why this is such a terrible idea.
Payday loans are the worst credit product you can consider, especially for holiday shopping. First of all, once you take out a payday loan, the money (plus fees and interest) is due on your next pay period, so the financial relief will be very short lived – if it even offers financial relief. Even if you take out the loan right before the holidays (leaving very little time to shop), you’ll be facing repayment before we’ve even entered 2017.
Additionally, the cost of borrowing is sky high, making payday loans very difficult to pay off. For example, if your net earnings for 2 weeks equals $1,500, you take out a $1,000 pay day loan that carries a $200 fee to borrow. On your next pay cheque, you have to pay back $1200 out of your $1500, leaving you with only $300 left over. Not a great scenario, no matter how you look at it. This is how people end up getting multiple payday loans, or paying those high borrowing fees to continually roll over the same payday loan again and again.
If you need holiday funds, the best thing is to have a plan. Here are some tips:
Look for the money in the right place. If you have bruised credit, don’t think of the bank as a first (or final) option. Investigate companies that have experience providing loans to people who are in your credit circumstances – for example, don’t waste time applying at places that don’t finance previous bankrupts, if you are a previous bankrupt.
Look for the right type of credit product. You need the right balance of not too short-term, like a payday loan and not too easy to stretch out, like a credit card – a short term personal loan is a great way to achieve this.
Look at the benefits. Does the lender report to the credit report? This will help you build good credit. A payday loan doesn’t report to your credit report…
Look at your assets. Think about what you can leverage to smooth the financing process. For example, if you own a home or a vehicle, using these as security will increase your financial options. In fact, the presence of equity could mean that you could be approved for a loan that you otherwise couldn’t have been approved for.
This holiday season, don’t get stuck singing the blues.
Call Prudent Financial today to find out more about your options for smart holiday spending: 1-888-852-7647.