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  2. An Instant Online Payday Loan Won’t Solve Your Money Problem

An Instant Online Payday Loan Won’t Solve Your Money Problem
Here’s Why and What to Do Instead

By Julie Jaggernath

An instant online payday loan might seem like an easy way to solve your money problem. It’s an advance on your pay cheque, goes right into your bank account like cash, and gives you the money you need to pay your rent, buy groceries, or cover daycare expenses. The high cost of living is forcing many Canadians to make drastic decisions around their finances. But relying on high-interest credit to make ends meet – the costs can seriously outweigh the benefits and cause lasting hardship. Here’s why and what you can do instead of struggling with your budget and debt.

Payday image, chalkboard, reminder

Payday Loans Can Get You Stuck In a Cycle of Debt

We’ve all seen dealing with debt equated to running on a never-ending treadmill. A payday loan, whether in-person or online, can seem like an easy way to bridge a shortfall from one pay cheque to the next, especially if you have exhausted conventional credit like credit cards, a line of credit, or an overdraft. But in reality, most people find out the hard way – and much too late – that they’ve inadvertently become stuck in a cycle of debt that’s difficult to escape.

You can’t borrow your way out of debt. Taking one loan as an advance means that you need to come up with enough money to pay that loan back in 2 weeks PLUS whatever you need to spend before you get the following pay cheque. That means you need about 4 weeks worth of money to cover your expenses during that 2-week period. Forget the treadmill. A life preserver to help you not drown will be what you need if you keep relying on credit to get by.

Debt Gets Worse the Longer You Ignore It

When life becomes overwhelming, it can be tempting to ignore our debts and bills. You might have relied on available credit or cash advances to pay for regular living expenses for so long that you can’t imagine how you’ll survive without those lifelines. However, debts have a way of becoming worse, not better, when we ignore them.

When you’re in debt and looking for ways to manage all of your payments, reach out for help sooner than later. You’ll typically have more options available to you than if you wait and get deeper into debt. And having a plan, even a difficult one, is better than wondering when the other shoe will drop.

No one can argue with the convenience of an instant loan, and it can feel like a daunting task to regain control of your finances. But ask yourself honestly what your future will look like if you don’t take action. How will you manage all the stress and pressure?

Alternatives to Costly Loans for People with Bad Credit

How to Escape from a Payday Loan Nightmare

Before you can escape from a nightmare caused by payday loans, you need to understand what got you into debt in the first place. It might be one of the reasons listed below or a combination of several of them. Think about:

  • Was there one emergency expense that wiped out your savings account and you didn’t have a chance to rebuild it before facing the next cash crunch?
  • Did your income decrease?
  • Did your expenses increase?
  • Where do you stand with your budget? Do you have one?
  • Are there non-financial factors that contributed to your situation (e.g. addictions, family upheaval, spending problems, mental health challenges, or a legal situation)?
  • Do you have debts that you should have dealt with sooner?

Once you know why you turned to payday loans to solve your money problems you can take steps to avoid relying on them again. Some of the steps you’ll need to take will also help you develop sound money management skills that can create a more stable financial future for you and your family.

5 Reasons to Avoid Payday Loans

Open a New Bank Account

First, you’ll want to keep the pay cheques you do have safe. You might need to open a bank account at a financial institution where you don’t owe any money. This is a crucial step when dealing with any debts that you’re not able to pay.

When you agreed to the payday loans, you gave them permission to take payments from your bank account. While you’re working on straightening out your situation you need to keep the cash you do have safe. Close the original account if you can to stop service fees from accruing when a payment to your payday loan is returned NSF (non-sufficient funds). If you are joint on any bank accounts, including those with your kids, have the other person open an account just in their name.

Offsets apply to any debts you might have (e.g. bank loans or credit cards) at financial institutions where your pay cheques, private pension money, or investment income is deposited. Contact us to learn more if this is something you’re struggling with.

Create a Realistic Budget

Next, you’ll need to outline your budget. If you don’t have one, you’ll need one because your budget will determine how best to deal with your debts. Once you know what your expenses total up to, including some savings for expenses that just happen throughout the year, subtract them from your income – how much is left? If you’ve got some money left, your options will be different than if your whole pay cheque is spoken for.

While savings might be the furthest thing from your mind, some savings will help avoid more debt. It’s like a safety net, something to fall back on – rather than a loan, the next time you need some cash.

Determine If You Can Afford Payments or Not

If you have money left in your budget, propose a payment plan to your payday loan lenders or companies. While they might not agree, staying in regular communication with them and making small, consistent payments goes a long way. An appointment with one of our credit counsellors will also help you know if the payments you think you can afford truly are realistic.

If you don’t have any money available to make payments with, contact us for help before your situation gets worse. The last thing you want is to have your wages garnished or child support deducted at source. There’s no shame asking for help when you need it. Expert advice will go a long way to gaining your creditors’ cooperation as you work to get some relief from all of your debts.

Assess Yourself for the Warning Signs of Debt

Instant Payday Loans With Easy, Online Cash are No Quick Fix for Money Problems

The convenience of instant cash and online payday loans can feel like the saving grace for your money problems. But there’s never a quick, easy fix for debt. Most provinces in Canada have legislation regulating the payday loan industry but the rules won’t keep you safe from yourself. If you’re desperate for cash, the cost of borrowing disclosure the lender gives you won’t mean much; all you want is the cash. Stop relying on a costly, temporary solution to a more serious underlying problem. Get help to deal with your debts once and for all and look forward to a more stable financial future.

Last Updated on June 11, 2024

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