Q: What’s the best approach to payday loans?
A: Consolidate them and never look back!
Payday loans often seem like a good idea at first. If you need cash fast, they meet that immediate need. But the long-term consequences are not nearly as effective…
When you go to a payday lender, you can quickly borrow cash that you pay back when you get your next paycheque or your next social assistance, disability, pension, or other regular income payment.
Many people who use payday lenders do so because they need the funds quickly, such as to pay for an emergency expense (like a sudden home repair) or because they need an advance on their paycheque or regular income.
In Ontario, payday lenders are only permitted to lend you up to 50% of your net income for a typical pay period. The most you can borrow is $1,500.
There are two main issues with payday loans: 1) the sky-high fees and 2) the short repayment period.
A payday lender can charge up to $15 for every $100 you borrow. Usually they have to be paid back all at once by the end of the loan term — typically 14 to 28 days, but no more than 62 days.
If you can’t repay the loan in the repayment period, the lender can also charge interest for the time after your payment was due. This can be up to 60% as an annual interest rate!
Often, people get into a vicious cycle where they take out a payday loan, can’t repay it, so they take out another loan, and another, and so on…
This is why the best approach to payday loans is to consolidate and never look back!
Payday loans may seem like a dream come true at first, but they quickly turn into a nightmare.
A far better solution is to use a personal loan — either to fund the original need for the payday loan (for example, take out a personal loan vs. a payday loan to begin with) or, if you’ve already taken out the payday loan, to consolidate your debt so you don’t owe the payday lender any longer.
Depending on the lender, personal loans come with much lower fees and longer repayment periods than payday loans, plus you can often get same-day financing.
Consider this comparison between a payday loan and a personal loan from Prudent Financial Services:
Loan Amount: $2,000
Payday Loan Two-Week Costs: $420
Prudent’s Monthly Costs: $38.95
Payday Loan Annualized Costs: $10,920
Prudent’s Annualized Costs: $467.37
What payday loans charge in two weeks is almost the same as what Prudent charges in a whole year!
The best thing to do when you’re considering or already juggling payday loans is to consolidate them. Consolidating payday loans is easy when you come to Prudent Financial Services.
See if you’re eligible for a Prudent personal loan and explore your options for consolidating payday loans today. Call 1-888-852-7647 or visit www.prudentfinancial.net for a free consultation.