5 minutes - Video
Are you stressed out? Need money? Unable to pay a bill? Stay away from a pay day loan. It’s a quick fix that will only make things worse for you later on.
Manraj Waraich is a Financial Educator at the Credit Counselling Society. and she teaches people how to be smart with money.
She has seen countless people turn to pay day loans, thinking this is the answer to their money problems.
“Typically what happens is somebody is stressed out and needs money and so they go to a pay day loan lender, without always knowing what exactly the terms are,” says Manraj.
Blinded by extra cash
Most people have no idea what they are getting into with a payday loan. They are just blinded by dollar signs or the fact that they can easily get some extra cash.
You need to pay attention to what you’re really paying for when you sign up for a payday loan.
Not only will you have to pay back the money they loan you, you will have to pay interest on it, fees, and maybe more.
“It’s really important to read the fine print, and most people don't. You need to understand the basics of what you’re agreeing to. They might want that money back in two weeks, or charge interest. There can be a lot of different fees too,” says Manraj.
Read the fine print. Or better yet, just stay away.
Debt can happen quick
One of the biggest problems with pay day loans is that it’s easy for youth to fall behind and get in debt quick. One pay day loan leads to another and then another…and before you know it, your entire cheque is owed to someone else. You have nothing left over to pay your other bills or for your own fun.
“What we often see is that they go from one pay day loan lender to another and to another, and that's how the cycle starts,” says Manraj. “If we have multiple pay day loans, borrowing from one pay day lender to pay off a second pay day lender will only increase our debt. This can get really stressful and very, very overwhelming.”
Stopping the payday loan cycle
If you owe a pay day loan or more than one, STOP borrowing.
It may sound crazy, but you can actually call the pay day loan company and try to get a lower interest rate or see if they will forgive some of the fees. Ask them to mail or email you copies of what you agree to. Manraj says you can also call a ‘credit counsellor’ for advice.
To find someone, you can google ‘credit counsellor’ near you or call the Credit Counselling Society at 1-888-527-8999. Remember to read their google reviews. Manraj says:
“You will not be judged or shamed at all, and you should never feel judged or shamed because we’re never taught these money skills. A credit counselor can go over your entire financial picture and guide you to the best option.”