The controversy surrounding the use of payday loans seems to be relentless, as is the payday loan trap in which a borrower can get caught when he is financially desperate enough. Every day, people across Canada get caught up in payday lenders who take advantage of their desperation to make big profits while ruining the victim’s financial health. Many places in Canada are trying to ban the use and sale of payday loans because of the lasting economic impact they can have on consumers.
This is a big problem that the payday team often sees among its current and potential customers. Someone found themselves trapped in a vicious circle of revolving payday loan debt, with seemingly no way out of it, unless they collapsed in debt for months or even years, or declared bankruptcy. But what other options do you have? Here are our tips.
Why Are Payday Loans So Dangerous?
Before moving on to debt reduction options, it is essential to understand precisely what payday loans are and why they can be so dangerous for your finances. First of all, payday loan works, as the name suggests. The cycle begins when someone has trouble paying for something important. These may include car payments, rent, groceries, or any other expense that must be paid within a time limit. These people need money quickly, so they opt for a payday loan instead of an alternative like a credit card or a private personal loan. Once they get the loan, they will have until their next payday to cover the entire loan, usually two weeks, according to a typical bi-weekly paycheck.
Here’s the problem. This loan will likely come with a tremendous interest rate (usually just under 500%) that many borrowers ignore because of their need for quick cash. Their salary, meanwhile, comes with tax deductions, which is not enough to pay the entire loan. This is where the cycle begins, which sometimes doesn’t stop. Many borrowers find it difficult to repay the full loan amount, interest charges, and charges, and before they realize it, they are already trapped.
Ways to Debt Payday Loan Debt
If you are considering opting for a payday loan to solve your financial problems, we invite you to reconsider this option. There are countless other options to help you deal with the situation that is not only safer but will help you get out of debt as quickly as possible and get back on track.
If you are currently suffering from debt, the good news is that there are several options available to help you break a vicious circle and improve your financial situation.
Talk to a professional
The first thing to do if you have the feeling that your loan debt is overdue is about to get out of control, is to talk to a financial adviser or credit counseling agency. One of the many problems with payday loans is that, since they are usually a small amount, around $ 1,500 or less, people tend to want to try to deal with their problems alone. It is a good idea to seek the help of a professional counselor, as they may offer you other options you may not have even thought of, other than declaring bankruptcy or staying in debt for a long time. Period. Banks will also have financial advisors who can give you a free consultation, and together
Pay off your debt immediately no matter how
The easiest and most effective way to manage your payday loan debt is to do everything you can to pay off your entire debt. Having your bank account drained until your next payday to pay off a debt is much less severe than falling into the vicious cycle of payday loans. Work overtime, reduce all your unnecessary expenses, and save as much as possible.
One of the main differences between debt consolidation and the next option, a debt management program, is that it will not affect your overall credit rating. With debt consolidation, you will consolidate payday loans with all of the other unsecured debts that you may have. Then you will make a more affordable monthly payment to pay off the full amount of your debts. Indeed, you will be using another loan, but the interest charges will be much lower than those of a payday loan.