payday loan

Payday Loans

Everywhere you look these days there seems to be a Payday store on every corner. They advertise quick cash whenever you need it – from a leaky roof, medical issues, unexpected emergencies, and other financial shortfalls. Loans usually range from $50 to $1,500, as an advance on your next paycheck.

These loans are different from traditional bank loans as they are typically short-term to cover expenses until a person’s next payday. A person typically pays a flat rate for the amount borrowed with a repayment schedule based on their next payday. They are in fact, a short-term borrowing loan at a very high interest rate, and one of the most expensive loan options.

An individual should consider prior to entering into one of these financial arrangements that they are in effect borrowing against their next paycheck. This as a result, may leave them with a partial, or even worse, no paycheck to handle their living expenses due the timing and amount fee and principal repayment. This potentially has the person entering into further payday loans to cover daily living expenses due to the shortfall.

A person could find themselves in a constant cycle of borrowing under these arrangements without a possible exit. Trapped in a never ending cycle of payday loan borrowing and leading to future financial difficulties as the lending rates increasingly reduce disposable income available for living expenses. Therefore, the individual ends up in a position of having a payday without a paycheck.

How they work : Your payday loan is often only a few hundred dollars, and are payable in 2 week periods. You write a postdated cheque and they will cash it on the day indicated. If, however, you are still unable to repay this loan with the interest, you have the option of asking for an extension. This, then leads you into an endless debt cycle and to make matters worse, if you bounced a cheque written to a payday loan lender, it may end up on your credit record or incur charges at your bank.

The Financial and Consumer Services of New Brunswick (FCNB) nicely outlines 10 things you should know about payday loans in NB.

Payday loans increase your risk of going further into debt and the inability to pay the loan back along with other bills. Before you take out a payday loan, please consider your alternatives such as budgeting and saving for emergencies, using a line of credit, working overtime or extra hours, or even borrowing from friends and family which will be a less expensive and safer option for you in the long term.

Things a Payday Loan lender CANNOT do :

  • They cannot force you to sign over assets you own.
  • They cannot garnish your wages
  • They cannot give you more than one loan at a time.
  • They cannot charge a penalty fee for prepaying or cancelling your loan
  • They cannot access your bank account
  • They cannot contact your employer for payment

We hope the information discussed has given you some insight into how payday loans work and the potential pitfalls and how they may affect you.
We at Allan Marshall & Associates Inc. are always available free of charge to discuss any matters dealing with your financial situation. Please visit us at www.wecanhelp.ca or don’t hesitate to call us at 1-888-371-8900.

About Author

Scott Marshall BBA, C.I.R.P, L.I.T

Scott Marshall BBA, C.I.R.P, L.I.T

Scott is serving as Vice President and managing partner of Allan Marshall & Associates Inc. since obtaining his License as a Trustee (LIT) in 2003. Scott graduated with a Bachelor of Business Administration (BBA) from the University of New Brunswick and is an active member of the New Brunswick business community. In past years, Scott has been a valued member of the Wallace McCain institute.