The payday loan industry is very lucrative. Companies that are involved in this market benefit greatly from the excessive interest rates and fees they charge for their products, and it’s not just the borrowers who suffer. Payday loan companies have marginalized old businesses, often family owned, that charge reasonable rates and terms.
In many ways, payday loans are good. If you need a loan quickly, payday loan companies do a good job. However, the interest they charge you is not known. Not only that, if you miss a payment, there is also a fee. There is even usually an initial charge to the loan. There are also administrative fees, processing fees, audit fees … and the list goes on.
The cost to consumers is excessive, sometimes even abusive, but it is not the only problem. Payday loans are so easy to obtain that traditional, local and private lenders suffer. Since small private lenders charge lower fees and lower rates for their loans, they tend to take applications more seriously. This means that an approval can not be as easy and fast (although in fact it is still enough) as it is for a payday loan. However, by borrowing from a private lender, as opposed to a payday loan institution, you get much lower rates (about 10% less than payday loan companies charge) and you support a local business.
The rise of payday loan companies is threatening the private lenders market, which is bad for consumers. A world where fees
From a micro-loan exceed this one does not seem pleasant, so let’s look at alternatives to payday loans:
1. Private lenders
Private lenders are usually local businesses. They represent a scattered market in Canada. Most of them finance secured and unsecured loans. They can also provide loans against a house, car or other property at reasonable rates.
2. Borrow from a friend or relative
Borrowing from a friend or relative is not always easy, but sometimes necessary. Depending on today’s market uncertainty and the high costs associated with small loans, this may be an option you should not put aside.
3. Have you asked your bank?
Banks are not ideal for an unsecured loan, but if you need money for any purchase, the bank could agree to advance the money. In this case, the loan could be guaranteed by the purchase you make (eg a car or a snowmobile).
4. Do you have real estate equity?
If you have real estate equity, finding financing becomes much easier. You can probably get a line of credit or a second rand mortgage to justify your need for money. You can also refinance your current mortgage to gain access to more money.
5. Do not just rely on loans
Instead of borrowing money, you can work more, find a job next door, ask your employer for an increase, or advance on your payments, leave things as pledge … You have several options. Do not miss it.
Do you need help digesting all this?
Contact Prêts Québec and a specialist will advise you and inform you. We will help you make the right decisions.