Payday loans are credit products that have emerged only in recent years. Payday loans are short-term loans (usually $1,000 or less) that must be repaid by your next pay period. The costs of these loans can be exorbitant. Depending on the payday loan company, a $1,000 loan could cost as much as $250 to borrow for only two weeks!
Due to the escalating costs of such loans, payday loan companies have become a regulated industry. Some insiders have stated that perhaps these companies should not even exist. Payday loans have become even more readily available and an approved individual can obtain an online payday loan through a variety of payday loan companies.
As you see, payday loans can be the beginning of a vicious cycle. Case in point, here is an example of how quickly a seemingly small payday loan debt can turn on you, sending you into a financial tailspin.
1. A woman who earns $1,500 net bi-weekly finds herself embroiled in an unexpected financial issue and in need of some short-term cash, at which point she turns to a payday loan provider.
2. The payday loan lender grants her a two week loan for $1,000 and charges her a $250 fee to borrow the money.
3. Upon receiving her next paycheque, she is required to repay the payday loan lender $1,250. Taking into consideration that her paycheque is only $1,500, after paying back the payday loan lender she will only be left with $250.
4. With rent to pay and children to feed, it quickly dawned on her that going to a payday lender was a bad idea. With few options available, she decided to go back to the payday loan company to extend the loan another 2 weeks at a cost of $250.
5. This put some money back in her pocket, but it still leaves her short. She decides to take out a second small payday loan in the amount of $500 to make ends meet. This loan will cost $100 to borrow the money and is due on her next pay period.
6. By her next pay period she now has two payday loans to repay – one for $1,250 and the other for $600, bringing the total debt to $1850. Her paycheque was for only $1,500, thereby leaving her $350 short. Even if she rolled these loans over, she is still short and can’t even cover their fees. Thus leading her to take out a third payday loan.
We see individuals who are less than $10,000 in debt but because it is payday loan debt they are considering bankruptcy.
If you are in this situation, you should not disregard it. It is serious and must be dealt with immediately. There is good news; there are programs that have been made available by the Federal Government to help people that have fallen into these payday loan traps. These programs often do not involve bankruptcy and can put an end to the destructive payday loan cycle.
Avoid online payday loans all together and contact DebtCare at 1 (888) 890-0888 or visit us online at http://www.debtcare.ca/