When you are experiencing financial problems and are having trouble making your minimum monthly payments, and then another unexpected cost comes up, a lot of people rely on pay-day loan companies. They will loan you the money you need until your next paycheque, when you will pay it back. It sounds alright, but these companies tend to charge very high interest rates, so it might not be the best option.
For example, if a pay-day loan company is going to charge you a 350% interest rate (if you add up the interest you would pay if you had a loan for entire year) whereas your credit card is 25%, as bad as it sounds, it might make more sense to max out your credit card before you go to a pay-day loan company.
A common thought about pay-day loan companies is that they are taking advantage of the lowest-income people who cannot get good jobs, but actually, these are people who are well-educated and are employed full time. They have just run into life circumstances that are making it difficult to cover their expenses. Some pay-day loan companies say those who take advantage are not operating under what they call ‘best practice’ rules. These rules state for example, that no loan should go over $1,500, that they cannot have your assets assigned to the loan as security, and the term of the loan cannot exceed 31 days.
In order to prevent people from being taken advantage of, the province of Ontario has implemented legislation to regulate payday loan companies. Even with more regulation, pay-day loan companies will continue to be a problem. They will still charge huge interest rates and there is danger in that people may come to rely on these regularly to get through the month. Sometimes, once people have used a loan service once and found it helped them, they will get into a habit of borrowing and significant amounts of their money will go toward interest payments rather than toward getting back on top of their finances.
If you are having trouble making your monthly payments and are continuously borrowing from high-interest lenders like pay-day loan companies, you may be in more serious financial trouble that you think. Before you continue to waste more money on 350% interest rates, give me a call to talk about filing a a consumer proposal or personal bankruptcy to get rid of your debts and get a fresh start. Call Hoyes, Michalos & Associates today at 310-PLAN, or send me an e-mail and we can arrange to meet and look over your finances and help you make a plan to get out of financial trouble.
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