Have you seen this up and coming credit/banking industry product - Visa debit combo cards?…
We look at the real cost of payday loans – how they compare to the cost of other forms of credit, both in the short term and long term, as well as compare the varying cost across Canada. We also look at some intersting stats which reflect on the payday loan cycle, in this eye-opening infographic and blog article. If you are struggling to repay a payday loan, or are trapped in a payday loan cycle, contact SolutionsTM for help with your payday loan debt today.
Did you know? 37% of payday loan borrowers believe payday loan interest is the same as credit card interest.
Payday Loan Cost Comparison
The average payday loan in Canada is approximately $300 for a term of two weeks. Lets’s compare the cost of the average payday loan to using other forms of credit:
Line of Credit: $5.81
Overdraft on bank account: $7.19
Cash Advance on a Credit Card: $7.42
Payday Loan (regulated) minimum cost: $51
Payday Loan (regulated) maximum cost: $75
Line of Credit: $5 set-up fee plus 7% Annual Interest
Overdraft protection: $5 fee plus 19% Annual Interest
Credit Card Cash Advance: $5 fee plus 21% Annual Interest
Payday Loan: 17% – 25% total fee
Payday Loan Cost Across Canada
Minimum $17 – the cost to borrow $100 through a Payday Lender in Manitoba, the lowest regulated cost in Canada
Maximum $25 – the cost to borrow $100 through a Payday Lender in Saskatchewan, the highest regulated cost in Canada
Can’t Repay? Compare the Costs
Instead of repaying the $300 loan after 2 weeks, you carry the loan for 1 year:
Line of Credit: $21.41
Overdraft on bank account: $58.37
Cash Advance on a Credit Card: $64.56
Payday Loan minimum cost (regulated in Manitoba): $182.30
Payday Loan maximum cost (regulated in Saskatchewan): $244.70
Same as above, plus Payday lenders will charge between $20-$50 NSF Fee and 30% Annual Interest
Payday Loan Cycle
93.8% of payday loans are taken by repeat customers
Almost 50% of payday loan borrowers took out 6 or more loans in the past 12 months
15% of borrowers are two or more months behind in mortgage or rent payments
400% – people are 4 times more likely to take a payday loan if behind on loan or bill payments
Non-borrowers of payday loans: 2 in 10 spend more than their income.
Borrowers of payday loans: 4 in 10 spend more than their income.
Ask yourself: Will you be able to pay it back?
Payday loans are the most expensive way to borrow money. High upfront fees plus a short repayment timeframe equals more likely to repeat loans and get caught in a cycle, making it even more expensive.
Financial Consumer Agency of Canada – http://www.fcac-acfc.gc.ca
Consumer Protection BC – http://www.consumerprotectionbc.ca
Government of Ontario “Capping Borrowing Costs – A Balanced Approach to Payday Loans in Ontario” – http://www.sse.gov.on.ca
If you are caught in a payday loan cycle, contact Solutions Credit Counselling Inc for help now!
www.creditsolutions.ca or call Toll Free: 1-877-588-9491