Quick Payday Loans Come With High Interest Rates\r\nOne of the main reasons not to get a payday loan has to do with their high interest rates, which are often higher than the interest rates on personal loans and credit cards. Most payday lenders assess a fee for every $100 borrowed, which can range from $15 \u2013 $30. For example, if someone took out a $100 payday loan, they would have to pay back $115 by their next paycheque. A $15 fee to borrow $100 may appear like 15% interest, but when you do the math, it\u2019s actually equivalent to a 390% annual interest rate, which is more than 10 times the typical rate on a high-interest credit card.\r\n\r\nAlthough payday loans are meant to be a short-term fix if you need cash now, the reality of it is that with the quick turnaround time (borrowers have until payday to repay the loan) and the high loan interest, a lot of borrowers aren\u2019t able to repay the full amount. Rather than defaulting on their loan, many borrowers opt to renew the loan, and in some cases the loan gets renewed so many times that borrowers can end up paying almost as much as the loan itself in just fees alone.\r\nQuick Payday Loans Come With High Interest Rates\r\nOne of the main reasons not to get a payday loan has to do with their high interest rates, which are often higher than the interest rates on personal loans and credit cards. \r\n\r\nMost payday lenders assess a fee for every $100 borrowed, which can range from $15 \u2013 $30. For example, if someone took out a $100 payday loan, they would have to pay back $115 by their next paycheque. A $15 fee to borrow $100 may appear like 15% interest, but when you do the math, it\u2019s actually equivalent to a 390% annual interest rate, which is more than 10 times the typical rate on a high-interest credit card.\r\n\r\nAlthough payday loans are meant to be a short-term fix if you need cash now, the reality of it is that with the quick turnaround time (borrowers have until payday to repay the loan) and the high loan interest, a lot of borrowers aren\u2019t able to repay the full amount. Rather than defaulting on their loan, many borrowers opt to renew the loan, and in some cases the loan gets renewed so many times that borrowers can end up paying almost as much as the loan itself in just fees alone.\r\nPayday Lenders Charge Costly Fees\r\nThese easy loans come with a quick turnaround time and quite often the borrower isn\u2019t able to pay back the loan once payday rolls around. This leaves the borrower with two options: the borrower can default on the loan and run the risk of getting sent to collections, or the borrower can pay an additional fee to roll over the loan for another two weeks. And, as we\u2019ll see, these fees are yet another reason to avoid payday loans. \r\n\r\nWhen the loan is renewed, most payday companies assess a fee on top of the outstanding balance. So using our previous example, if you take out a $100 same day loan \u2013 which turns out to be a $115 loan with the initial fee \u2013 and you choose to renew the loan because you can\u2019t pay off the payday loan by your next payday, you can expect to owe about $130, depending on the cost of the renewal fee.\r\n\r\nWhat starts off as a quick fix and a relatively manageable level of debt can quickly escalate due to the accumulating fees. As the loan amount increases, the more difficult it becomes to pay off the loan in full, which leaves the borrower with no choice but to continue renewing the loan and accumulating more debt.\r\n\r\nMany people who aren\u2019t able to pay back their loan for good often get caught in an unending cycle because they have to keep carrying over their loan, or they end up taking another payday loan from another loan lender in order to pay off an existing one, which is something we\u2019ll explore more in depth below.\r\nRelying on Fast Cash Can Lead to a Debt Cycle\r\nEven though most payday loans in Canada are to be repaid within two weeks, reports have shown that the average payday borrower stays in debt for a much longer time period. Because of the high fees and interest rate, it\u2019s easy to get caught in a repeat cycle of rolling over the loan for another two weeks, or taking out another payday loan in order to pay off old loans.\r\n\r\nFor example, let\u2019s say an emergency came up and you needed $200 in cash. If your credit cards are maxed out and you don\u2019t have enough money in your chequing or savings account, you turn to a payday advance lender to get the cash. For a fee, you get the money on the spot which brings you a temporary wave of relief. But come payday, you realize you don\u2019t have enough money to meet your day-to-day expenses plus the cost of the loan.\r\n\r\nSo, you put down more money to extend the loan, which you hope to pay back by your next payday. However, by this time the amount you owe has increased, making it even more of a struggle to pay off the loan completely. So, you extend the loan once more to buy more time to pay off the loan. And, that\u2019s how the debt cycle starts. As the cycle continues your balance keeps growing, and it could reach a point where you owe more in fees than you do on the outstanding loan.\r\n\r\nInstant cash comes with a price, in the form of high fees and interest rates. This method of borrowing money can get expensive, especially if you\u2019ve made a habit out of taking payday loans just to meet your day-to-day expenses. Getting a payday loan may help you get out of a financial jam, but it\u2019s only a temporary solution to a more serious underlying problem.\r\n\r\nRelying on Payday Loans Facilitates Unhealthy Financial Behaviour\r\nIt\u2019s convenient and easy to get a payday loan, but the downside with getting easy cash is that it\u2019s a temporarily fix for a long-term financial problem. Until you can remedy the underlying problem, getting payday loans will only strengthen unhealthy saving and spending habits, which will cause financial troubles in the future.\r\n\r\nIt may not seem like a big deal to take out an emergency cash loan, but the reality of it is that more people are turning to quick payday loans to cover everyday living expenses, such as groceries, utilities and rent. This sort of borrowing is particularly harmful, because the more accustomed you are to taking out fast cash loans whenever you need money, the less likely you are to learn how to manage your finances properly.\r\n\r\nManaging your finances and knowing how to budget and save for emergencies is crucial to financial freedom. If you\u2019re just managing to get by now with a few payday loans here and there, an external event \u2013 such as a job loss, an illness or a major home repair \u2013 can really take a hit on your finances. The danger with this is that you may resort to taking out payday loans to cover both the emergency and your living expenses, which could tip you into a debt cycle that\u2019s hard to get out of.\r\n\r\nIf you find yourself taking out instant loans to cover basic expenses, this is a red flag that signals your finances could use a makeover. Instead of turning to cash lenders when you\u2019re in need of money, it may be to your benefit to turn to a credit counsellor instead. More often than not, we need a payday loan because we don\u2019t know how to budget money, how to save, and how to live within our means, and this is something an accredited credit counsellor can help you with.\r\n\r\nAvoid Going to Direct Payday Lenders Because There are More Affordable Ways to Get Cash\r\nWhat some people aren\u2019t aware of is that paycheck loans don\u2019t have to be a solution to financial shortfalls \u2013 it pays, literally, to consider other options. To start, if you have a decent relationship with your creditors, it doesn\u2019t hurt to ask them if they\u2019re willing to extend your due date. If you know you won\u2019t be able to make your payment on time, call them and let them know the soonest you can. If you ask, most creditors are willing to work with you to extend your due date or set up a payment arrangement so you can make a series of smaller payments.\r\n\r\nAnother option is to ask your employer for an advance on your paycheque. If you work for a small company with flexible policies, they may be willing to give you a payday advance, which is the same in principle as getting a payday loan, but without the excessive fees. However, you also have to keep in mind that getting a payroll advance will also lower your next paycheque.\r\n\r\n\r\nBorrowing from your family or close friends is another means to get short term loans. You\u2019ll have to swallow your pride by asking those close to you for help, but it won\u2019t be nearly as expensive as going to a payday lender. But, getting a cash loan from a friend or family member can be tricky, because if you don\u2019t pay back the loan as agreed upon, it could damage lifelong relationships. So, if you decide to borrow money from family or friends, be as serious about repaying the money as you would pay back the bank or a business lender.\r\n\r\nIf you have a credit card with an available balance, you can use that to pay for the emergency or take out a cash advance. Although you\u2019ll still have to pay a fee and interest for taking a cash advance on your credit card, it\u2019ll be less costly than a payday loan. Bear in mind that cash advances do have high interest rates (averaging about 30% annual interest), so make sure you don\u2019t charge anything else on the credit card and that you pay off the balance as quickly as possible.\r\n\r\nIf you\u2019ve exhausted all these options and you\u2019re still short on funds, it\u2019s time to start looking at your budget. You can decrease your monthly expenses by cutting down on things such as food and groceries (pack a lunch to work or swap meat for a less expensive protein like tofu or eggs), minimizing transportation costs (take public transit, carpool, run errands on a single trip to avoid unnecessary driving), and scaling back on entertainment (borrow DVD\u2019s from the library, hold a games night instead of going to the movies). Here are more ways you can save money and pay off debt.\r\n\r\nTo further boost your cash flow you can consider clocking in overtime hours at work or getting a side job. Not only will the increase in income help you pay off your payday loan, it will also help you start saving money so you won\u2019t have to turn to payday loans again. If you have a hobby or a skill in great demand \u2013 such as baking or photography \u2013 you can offer your services to people in exchange for money. Also, if you have a garage full of household items you no longer need, you can sell them on sites such as Craigslist or Kijiji. Not only will you get a source of money, but you\u2019ll also be clearing away clutter in your home.\r\n\r\nTurning to community resources for help is another option worth considering. Food banks and soup kitchens exist in communities for a reason: they\u2019re there to help people who are in a tight financial situation and are struggling to get by. Many people have turned to these resources when they were in need of a helping hand, and if you find yourself in need of help, these resources are here for you. If getting a meal from a soup kitchen or some cans of food at the food bank can save you an extra $20 or so to help you pay off payday loans, it\u2019s certainly a move worth making.\r\n\r\nAlternatives to Personal Loans for People with Bad Credit\r\n\r\nGetting Out of the Payday Loan Cycle Takes Time, Planning and Dedication\r\nThese days it\u2019s easy to get payday loans, whether it\u2019s through a brick and mortar lender or through a website that offers online payday loans. However, it\u2019s important to remember that there isn\u2019t a quick fix when it comes to financial trouble. Getting one payday loan won\u2019t put you in a financial tailspin, provided that you can pay off your loan and the fees in full by our next payday. But in many cases, payday loans often get renewed and carried over into another loan, which can lead into an unending cycle of borrowing.\r\n\r\nIf you want to put a stop to the payday loan cycle, you first need to ask yourself why you needed to go to a payday lender in the first place. Once you know the answer to that question, you\u2019ll have taken a step towards figuring out how to get out of payday loans.\r\n\r\nThe Best Way to Get Payday Loan Help\r\nThe best way to get payday loan help is to make an appointment to see an accredited, non-profit credit counsellor. Getting a payday loan is a temporary solution to what often is a longstanding financial problem, and it\u2019s something you should learn to live without in the future. A credit counsellor will be able to help you identify which areas of your finances need strengthening and re-restructuring so you can keep up with payments while meeting your basic expenses. In addition to helping you put together a budget, a credit counsellor will also explain what measures you can take to avoid payday loans for good, and they\u2019ll also provide you with different options so you can get your finances back on track.