• Home
  • Mail
  • Tumblr
  • News
  • Sports
  • Finance
  • Entertainment
  • Lifestyle
  • Answers
  • Groups
  • Mobile
  • More
Yahoo
    • Skip to Navigation
    • Skip to Main Content
    • Skip to Related Content
    • Mail
    Lifestyle Home
    Follow Us
    • Style
    • Beauty
    • Wellness
    • Pop Culture
    • Shopping
    • News
    • Horoscope
    • Video
    • NowWith

    Payday loan alternatives that will cost you less

    Rubina Ahmed-Haq
    Yahoo Finance CanadaFebruary 14, 2018
    Reblog
    Share
    Tweet
    Share
    Payday loans are being used by Canadians on the brink of bankruptcy. Business Insider photo
    (Business Insider)

    A recent study found a growing number of Ontarians on the edge of bankruptcy are turning to payday loans to make ends meet. The study was done by the insolvency trustee firm Hoyes Michalos & Associates. It found in 2017, 31 per cent of insolvent borrowers used payday loans. That is up from 27 per cent from the year before.

    Household debt levels in Canada remain at record highs. The most recent Statistics Canada data shows the average Canadian owes $1.71 for every $1.00 of disposable income they make. This could indicate that more Canadians may be tapping the expensive payday loan market to pay their bills.

    But if you don’t have a credit card or access to a line of credit, is a payday loan a good way to bridge a financial gap until you get back on your feet?

    It is the most expensive way to borrow money

    By using their own calculator, Money Mart, one of Canada’s leading payday lenders, shows borrowing a $1,000 on an 18-month payback plan will cost you $520 in interest.  But the worse type of the short-term loans are the ones that are meant to get you to the next payday.

    If you take a cash advance, or payday loan, in Alberta the Annual Percentage Rate (APR) on a $300 loan for 42 days is 201.84 per cent.  The APR on a $300.00 loan for 14 days in BC is 443.21 per cent.  For Manitoba residents, their APR on a $300.00 loan for 12 days is 517.08 per cent.

    This isn’t secret information — these are number posted right on their website. Compare that to any credit card where the APR is around 19 per cent.  In some cases, payday loans are 25 times more expensive than cash advances on a credit card, when calculated annually.

    On the Ontario.ca website, there is a breakdown of how much a payday loan will cost you vs. a credit card cash advance in the short term. They say as an example, if you borrow $300 for 2 weeks, the payday loan will cost you $45, while a credit card advance with fees and an interest rate of 23 per cent, will cost you $6.15.

    Exhaust all other options first

    For anyone considering a payday loan, exhaust all your options first. Can you borrow from a friend for a short term? Do you have access to a line of credit? Is there something you can sell in your home to raise some cash? Can you pick up some extra work to make some more money?  Even using your credit card will be cheaper than a payday loan.

    Peer to peer lenders a good alternative

    There are alternatives to payday lenders that are still more expensive than bank loans, but will cost you less money than borrowing from a payday lender. Peer to peer online lenders, like Mogo, Lending Loop and Lendingarch just to name a few. The money is invested from private sources.  Rates are unique to each lender and the better your credit score, the better rate you’ll get. In some cases, the APR can be as high as 45.9 per cent, as stated on the Mogo.ca site.

    Stricter regulations for payday lenders

    Provincial governments across Canada are making changes to regulations to better protect consumers using payday loans. New rules are decreasing the amount payday lenders can charge consumers. In 2016, Alberta passed its Act to End Predatory Lending. The most that lenders can change is capped at $15 for every $100. They have also extended the buyback period.

    There are similar changes happing in British Columbia. Since 2017, the maximum fee is now $17 for every $100 borrowed. In Ontario, the fee, as of January 1st, 2018, is $15 for every $100 borrowed. Many provinces are also considering regulating to have the buyback period extended as it is in B.C., giving borrowers more time to pay back their loans.

    Payday lenders tout themselves as an easy way to bridge financing when you need to find the extra cash. But the reality is they are a complicated and expensive way to raise money, often making it hard to pay the loans on time and in full. This costs the consumer more money and keeps them in debt longer.

    Download the Yahoo Finance app, available for Apple and Android.


    Reblog
    Share
    Tweet
    Share

    What to Read Next

    • Police are warning parents about a '48-hour challenge' that encourages teens to go missing

      Yahoo Lifestyle
    • Will and Kate Are Apparently the Reason Cressida Bonas Dumped Prince Harry

      Marie Claire
    • The best mattresses for back pain of 2019, according to doctors. (And they're majorly on sale!)

      Yahoo Lifestyle
    • Harper Beckham Debuts a New Haircut at Mom Victoria's Fashion Show

      InStyle
    • Indiana officially gets its first national park

      Yahoo Lifestyle
    • Travis Scott Just Got Stormi the Most Insane Diamond Necklace

      Cosmopolitan
    • Khloé Kardashian Is Getting Mom-Shamed for Her Long Nails on Instagram — Again

      Allure
    • 7 Signs Your Partner May Not Be Emotionally Intelligent

      Brides
    • Why Is it "Weird" When a Woman Wants Sex More Than a Man?

      InStyle
    • Here's Where to Buy Kylie Jenner's $65 Valentine's Day Dress

      Marie Claire
    • Kelly Clarkson Covered 'Shallow,' and Twitter Is Rightfully Going Wild

      Glamour
    • “Mulled Wine Hair” Is the Coolest New Hair-Color Trend for Winter

      Allure
    • Liam Hemsworth Reveals He Almost Wasn't Cast in The Last Song Opposite Now-Wife Miley Cyrus

      People
    • Kylie Jenner Posted a Photo of Herself Holding a Mysterious New Beauty Product

      Allure
    • Governor Gretchen Whitmer Won't Stand For Sexist Comments About What She Wears

      Refinery29
    • Kelly Clarkson Covered “Shallow” and the Internet Lost It

      Vogue

    Trump to veto Alexandria Ocasio-Cortez resolution blocking national emergency unless Republicans lend support

    al: So the article refers to a bill that has NOT been introduced, has NOT been passed by the House, has NOT been sent to the Senate, has NOT been passed by the Senate and I am guessing has not even been written??

    Join the Conversation
    1 / 5

    721

    • Bella Hadid Just Celebrated The Weeknd's Birthday in a Camouflage Bra

      Harper's Bazaar
    • The 3-Day Military Diet Says You Can Lose 10 Pounds in One Week. Does It Actually Work?

      Delish
    • Why Prince Harry and Meghan Markle are Reportedly Planning to Send Their Future Child to an American School

      Elle
    • Harper Beckham Had the Cutest Bob Cut With Bangs at Victoria’s LFW Show

      Allure
    • Victoria Beckham's Fall 2019 Collection Is Here to Fill the Old Céline Void in Your Heart

      Fashionista
    • Kim Kardashian posts absolutely adorable photo of baby Chicago

      Yahoo Celebrity
    • Bella Hadid and The Weeknd Celebrated His Birthday With Matching Camo Outfits

      W
    • Kate Middleton and Meghan Markle Aren't Feuding, According to These Photos

      Marie Claire
    • Prince William And Prince Harry Are Reportedly Set To Really, Truly Split Their Royal Household

      Delish
    • 3 injured at 'Hamilton' after medical emergency sparks evacuation

      USA TODAY
    • Boy, 11, arrested after refusing to recite 'racist' Pledge of Allegiance

      Yahoo Lifestyle
    • Victoria Beckham's Entire Family Showed Up to Support Her at London Fashion Week

      Elle
    • Spaghetti with Avocado Pasta Sauce

      PureWow
    • What It Means That Harry & Meghan Will "Split Courts" From William & Kate

      Refinery29
    • Katy Perry Was Reportedly ‘Shaking With Happiness’ When Orlando Bloom Proposed

      Elle
    • Kylie & Travis Just Gave Stormi the Most Precious Lightning Bolt Necklace

      Harper's Bazaar