Payday loans are a financial quicksand that many borrowers find themselves unable to escape. The two main reasons people fall into this trap are bad credit and lack of savings. It's not easy to overcome either problem, let alone both, but it's worth striving to do so since payday loans can be so difficult to get out of. Payday loans, also known as cash advance loans, check advance loans, deferred deposit loans, or deferred filing loans, are marketed as a way to get “quick cash” with no credit check required.
However, these loans come with an interest rate of 300-500%, making them a very expensive option. If you need a loan, there are much better options than payday loans. Credit card cash advances usually have an annual percentage rate of 30% or less, and debt management plans can help borrowers improve their financial habits so they don't have to resort to payday loans in the first place. Borrowers who don't have cash may feel like payday loans are their only option, but there are still some great alternatives to explore.
Even if you're approved for a payday loan, it's important to consider your options before going to a payday lender. Other loan options offer longer repayment periods, lower interest rates, and installment payments that give you a real chance to repay the loan. Payday lenders are well aware that the likelihood of receiving repayment decreases with the size of the loan. If you fall behind on payments, you're likely to have problems in the future.
Even though most payday loans in Canada must be repaid within two weeks, reports have shown that the average payday borrower remains in debt for a much longer period of time. This type of loan can create a debt cycle that is difficult to break free from. By taking a more proactive approach and exploring other loan options, you can avoid getting stuck in the payday loan trap. Credit card cash advances and debt management plans are two good alternatives that can help you get out of financial quicksand.