Payday loans are seen as a last-resort option for someone who needs a quick bit of cash (in theory a few days before you receive your regular paycheque).
Unfortunately, many people fall into a trap of not being able to pay the loan back on time and end up paying exorbitant interest rates.
If you end up in a situation where you need cash quickly, even the Ministry of Consumer Services says that payday loans are “a very expensive form of credit” and suggests that “If you have other options for credit, use them first.”
Payday loans prey on people with bad credit and as such have very high interest rates. If you’re actively trying to get out of debt, you have to cross these types of loans off completely as the solution to ANY of your problems.
Not only are they predatory, but they only encourage you to try to borrow your way out of trouble.
How To Avoid Using Payday Loans
Of course the best way to avoid getting trapped with high interest loans is by not applying for them in the first place. That’s why your first step towards getting out of debt is an emergency fund that you can use in place of this loan. You’ll have to decide what amount makes the most sense for you, but typically $500 to $1,000 is a great starting point. If you can work hard to save this amount, then when an emergency happens you can use this fund and not go further into debt.
If that’s not an option, always try to find another option for borrowing money such as a home equity loan or even a family member to avoid using a payday loan.
If you truly can’t find another source of money to cover the current emergency, then you probably know that your financial situation is in deep trouble. With no savings and no other credit, every purchase is going to be a struggle.
It’s easy at this point to sink deeper and deeper into debt, either by rolling over loans (using one loan to service an older one) or just taking on more of them for higher and higher interest rates.
You might be scared at this point, and it’s important to use that fear. Namely, you should use it to get ANGRY. Your life is out of your control and you should stop feeling helpless and get angry that it’s come to this. Draw a line in the sand and say NO MORE.
There’s a good chance you need outside help to get your situation organized and under control.
If you’re at that stage and want to explore your options, please fill out this quick debt relief form. Get professional help assessing your situation and come up with a step by step debt relief plan to help you regain control and work your way out of debt.