Canadian Payday Loans: Emergency Source of Funds or Debt Tread Mill?

Canadian payday loans have exploded in popularity over the last ten years and for good reason. Our response to the global economic slow down has been a lot better than most other countries, but that doesn’t mean a lot of people aren’t out of work. And recently the pace of our recovery has slowed.

In July 139,000 full time jobs were lost and unemployment stands at 8%. While we might be doing better than our neighbors to the south, a lot of people are still struggling to make ends meet. What do you do when an emergency comes up and you just don’t have enough cash to cover all your bills? A lot of people turn to credit cards, family or friends but what if those options aren’t open to you?

Canadian payday loans, often called short-term installment loans, are a viable option for those looking to get a quick injection of cash until the next payday. If you have a checking account, a source of verifiable income and a working phone line you can easily get a payday loan. The requirements depend on your province and the provider but those are usually the normal ones in place.

A payday loan is paid directly into your checking account or to you at the shop if you’re getting it in person as opposed to online. Then when you get paid next they take the loan amount plus their fees and interest out. It’s pretty quick and painless!

Canadian law limits the amount of interest the payday loan companies can charge. In 2006 the federal government gave the provinces the right to limit the amount of interest charged. Novia Scotia, British Columbia, Alberta and Saskatchewan have all had limits put in place for years, ranging from $21 to $31 per $100 borrowed. Manitoba has recently enacted their own law that limits the fees at $17 per $100.

Payday loans are not permanent solutions to your money woes. If you think that you just continue to roll over your loans payday after payday, then you’re going to pay a high price in the end. These cash advances work just fine if you use them to get over a hump and pay them back. However, if you find yourself still in the hole and have to get another loan you might find yourself trapped on a perpetual debt treadmill.

If you find yourself trapped in this cycle of getting payday loans and not being able to pay them back completely, then it’s time to review your budget and lifestyle. Either you need to make more money or spend less until you have paid off the debt that caused the original loan.