Payday loans are a quick fix for people who are struggling to make their income stretch to the end of the month. These often come with high interest rates and have to be paid in full by the next payday.
In this guide, we’ll look into payday loan debt, including what it is, how people fall into debt with payday loan lenders, and how you can get your financial situation back on track.
Contents
How Payday Loan Debt Can Affect Your Life
For a lot of people payday loans are something they will turn to after exhausting all other debt avenues. This ultimately impacts on your life in a number of ways.
Personal Finances
Struggling with your personal finances can sometimes be the reason you apply for a payday loan in the first place. Using them regularly can often leave you short after being paid, and the interest rates mean you are often paying back more than double what you originally borrowed.
This can lead to many people either falling behind on other priority bills or incurring additional charges if you don’t make the loan payments. This often becomes the reason behind people having several payday loans because they become reliant on them to get through each month due to having more outgoings than income.
Mental Health
The cycle of debt affects everyone differently. Given that on average a Canadian owes $1.70 for every dollar of income they earn, it is safe to assume that they will also struggle mentally.
Financial Therapist, Megan Ford, has stated that financial fears are often linked with stress, anxiety and depression. This is often due to the feeling of guilt that is commonly linked with debt as described by Melanie Lockert, the author of the book ‘Dear Debt’. She states that many will feel shame for getting into debt and then frustrated when trying to get out of it, which can cause your mental state to take a dip.
Given the cycle many fall into with payday loans, it is no wonder that stress and anxiety levels will be more prominent.
Relationships
For most, debt is a very lonely place and feeling like you can’t talk to anyone about your struggles can affect the relationships with the people around you. If the topic becomes off-limits then the problems can intensify and lead to recurring arguments.
According to an article posted by Huffpost, 1 in 10 Canadians have admitted to hiding purchases and debts from their partners and it has been reported that 80% of all families worry about financial issues on a daily basis.
Warning signs that you’ve fallen victim to predatory lending?
If you are falling into the vicious cycle of payday loan debt, you may recognize the signs below:
- Relying on these loans to get to the end of each month
- Falling behind on other priority bills
- Leaving yourself short and unable to afford necessities such as food
- Experiencing feelings of anxiety, stress and depression
- Hiding the loans from others
The stigma around debt makes it a commonly avoided topic, but you may notice some of the below signs if someone you know is struggling:
- They appear depressed, stressed or anxious for no clear reason
- Relationships shifting and an increase in arguments (if you live with someone)
- An absence of utilities within their home
- Hiding their finances from you (if they are normally open about this)
How to get help
The responsibility of debt is a weighty burden for most to have on their shoulders, and everyone will have a different outlook on this. However, debt is not always easy to shift. The following points are some measures you can take to help regain control of your money.
Recognize that you need payday loan debt relief
Being open and transparent can be vital in overcoming financial hurdles. Recognizing that you are struggling can often be the first step to getting yourself out of debt
Reach out to the payday loan lender
Contact the loan provider and explain your situation, this may allow you to lower your payments or negotiate your payment plan.
Find a debt management plan to help clear your payday loan debt
If you’re really struggling with payday loan debt, your payments are spiraling, and you’re not sure how you will be able to afford the interest, charges, and late fees, you may be interested in debt relief options, like:
- A consumer proposal
- A debt settlement agreement
- A debt consolidation loan
Most of these debt solutions allow you to consolidate your unsecured debts into an affordable monthly payment and allow you to work towards being debt free by living within a realistic budget. If you’re not sure which debt solution is right for you, you should talk to a debt expert as soon as you can.
Where can I find debt advice and guidance if I’m financially vulnerable?
Debt can be scary and confusing, but it doesn’t have to be. At Farber Debt Solutions, we’re here to help you get back in control of your finances and will do our best to give you the best solution for your situation.
Whether you’ve made the mistake of using a payday lender and you’re struggling to meet your repayments, or you just want some advice on how to improve your finances, our team are here for you.
To speak to a friendly debt expert today, give us a call for free on 877-375-6558 to find support.
How do people fall into the payday lender debt trap?
Sky-high interest rates
With interest rates as high as 35% even the smallest of loans end up spiraling out of control. This then causes people to end up reliant on this type of loan to pay back the previous one in an endless cat and mouse chase.
Juggling other unsecured debts
People who use payday loans are often facing other financial problems – you don’t borrow money from a payday lender unless you’re desperate. These people may already be juggling credit card debts, personal loans, and other debts that make it harder for them to repay a lender charging such high interest.
Payday loan cycle
It’s not just interest and other debts that make it difficult to find your way out of a payday loan hole – it’s the combination of the two. The terms and conditions in payday contracts often leave people feeling trapped in a never-ending cycle of debt that they may never clear. This in turn causes people to fall into further poverty.
Are there any laws in place to protect consumers against payday loans?
It was reported by Global News that the lenders place the majority of their stores in low income areas as a marketing strategy which has been wildly criticized.
There have been recent proposals to make changes to the Business Practices and Consumer Protection Act such as setting limits on the total cost of borrowing and prohibiting certain fees and charges to help people only borrow affordable amounts. However, it is unclear whether this will be implemented yet.
