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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 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?

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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.

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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 October 18, 2024

How Tariffs Could Increase Your Costs

Tariffs on goods don’t just affect businesses—they can trickle down to your wallet, too. For example, if the cost of importing agricultural products like fruits or meat goes up, grocery stores may pass those higher costs on to you. Similarly, tariffs on steel or electronics could make big-ticket items more expensive. The result? Your everyday expenses could climb, leaving less room in your budget for savings or debt repayment.

With over 70% of Canada’s trade tied to the States, tariffs can lead to higher prices for imported goods. Specific industries, like the automotive sector (Canada exports $50 billion in vehicles and parts to the U.S. annually), are likely to be affected, potentially increasing the cost of cars and repairs. To stay ahead of rising costs, look for ways to save money on groceries, by using budgeting apps or trackers. Consider switching to locally produced products or generic brands where you can also find savings on groceries.

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Budgeting and Building an Emergency Fund for Rising Costs

If rising costs are stressing you out, you may require adjustments to your budget to keep essentials covered. With $20 billion in agricultural products imported from the U.S., tariffs could drive up food prices making your budget unbalanced. Making the required adjustments to cover your essentials and building an emergency fund can help you stay on track.

Start by reviewing your budget and identifying areas where you can lower expenses. Even small changes can free up cash for essentials. At the same time, consider a financial reset, including allocating what you can to an emergency fund, no matter how small the amount. Over time, these contributions can add up, giving you a financial cushion when you need it most during uncertain times. If you receive a windfall, like a tax refund or bonus, consider using it to boost your emergency savings.

Debt Management Strategies in Uncertain Times

Tariffs and economic uncertainty may make debt repayment more challenging due to higher interest rates or reduced income. Prioritizing debt can help reduce financial stress and free up cash flow, ensuring you stay on top of your obligations. Focus on paying down high-interest debt first, such as credit cards or payday loans, as these cost you the most over time. Resist looking for information about bankruptcy chapters because those are American. If you’re struggling or unsure where to start, contact one of our Credit Counsellor for a free and confidential session to answer your questions and explore options like debt consolidation or a debt management program.

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Planning for Irregular Income

Tariffs may lead to job instability or reduced hours, especially in industries tied to U.S. trade. Keeping a flexible budget can help you manage fluctuating cash flow and ensure you can cover essential expenses, even when facing reduced income. Start by creating a variable income budget that lists essential expenses and prioritizes them. If you have high-earning months, set aside a percentage of those pay cheques to cover low-earning months. You might also want to explore side hustles or gig opportunities to supplement your income. Taking steps before reduced income happens can prevent a lot of stress if you do see a dip.

What to Do If You’re Laid Off

With 2 million Canadian jobs tied to U.S. trade, job loss is a possibility during economic uncertainty. Having a plan can help you stay afloat while you search for new opportunities. Government programs and community resources can provide temporary support during this challenging time.

If you’re laid off, apply for Employment Insurance (EI) benefits as soon as possible to access temporary financial support. Next, prioritize essential expenses and cut non-essentials, such as entertainment or subscriptions. Finally, update your resume, network, and explore temporary work or retraining opportunities to get back on your feet.

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Long-Term Financial Planning Amid Uncertainty

Tariffs and economic shifts can disrupt long-term goals, but staying flexible can help you adapt. Regularly revising your financial plan ensures you stay on track, even when circumstances change. Reassess your savings goals, such as homeownership, retirement, or education, and adjust timelines as needed. If rising costs are making it harder to save, consider extending your timeline or reducing your monthly contributions temporarily. Additionally, diversify investments to reduce risk during economic volatility.

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Staying Financially Resilient During Stressful Times

Financial stress can take a toll on mental health, but staying proactive can help you feel more in control. Small, consistent actions can build resilience over time, ensuring you’re prepared for whatever comes your way. Try to avoid impulse spending or borrowing during stressful periods, as these can make your financial situation worse in the long run. Instead, focus on small, consistent actions, like sticking to your budget or setting aside a little money each week. If you’re feeling overwhelmed, seek support from a financial advisor, Credit Counsellor, or mental health professional as needed.

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The Impact of Tariffs on Canadians and What You Can Do to Prepare

Tariffs may be out of your control, but how you respond to their impact on your finances is not. By staying informed, adjusting your budget, and focusing on your long-term goals, you can navigate these challenges with confidence. Whether you’re dealing with rising costs, irregular income, or the fear of a layoff, the key is to act now—so you’re prepared for whatever comes next.

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