Payday Loans Ontario – Why They’re Bad and 5 Better Options
Payday loans might sound good at first… but do you fully understand what a payday loan is?
It’s almost never a good move. The cost of borrowing for this type of loan in Ontario is incredibly high, and repayment is always expected in full upon your next paycheck.
People who use payday loans tend to get locked into a cycle of using them. The good news is, there are almost always better options. In this article you’ll learn about five of the best. There are other, more manageable ways to borrow money online, and many other ways to earn some money.
If you aren’t sure what a payday loan is, or if you want to know why they are bad and what you can do instead, you’ve come to the right place. Here, you can learn about the pros and cons of Ontario payday loans, and also learn about better options in the event you need short-term cash in a hurry.
Disclaimer: the content of this page was created for informational purposes only, it has not been vetted by an expert and should not be constructed as personal advice. Also, this page may contain affiliate links; if you follow them and take out a loan, we may receive a commission.
What is a Payday Loan, Really?
These are money people borrow against the expectation of their next paycheck. They are small, short-term loans that many working people and students use to bridge the gap between paychecks. They are almost always due in less than a month, and must be paid in full.
The glaring problem with payday borrowing has been the same ever since you had to go into a store to get one. People applying for them are often feeling desperate when looking for a loan in Ontario, and if they know they won’t pass a credit check they may feel like they have only one option. Fortunately, other options do exist.
Instant payday loans are even worse because they are designed to catch people who are feeling desperation and often have the highest rates. Read on to learn more about the best alternatives to online payday loans Ontario.
What Are the Alternatives to Payday Loans?
There are quite a few different methods for getting your hands on some money; the options on this page focus on things that will work as immediately as possible, making them viable alternatives to payday loans.
If you find yourself in a situation where you need quick cash but don’t have the time to wait for a paycheck to arrive, it can be tempting to consider this option. Payday loans are intended to provide a short-term solution to cover emergency expenses, like a car repair or medical bills, but they can easily become a long-term debt trap if you aren’t careful. This post is intended to help you avoid falling into that trap.
Below we’ll discuss alternate options such as short term loans, personal loans, lines of credit, credit card advances, and secured loans. While none of these are exactly ideal either, they are all significantly more manageable than taking out a payday loan.
#1: Short Term Loans in Ontario, Canada
This type of lending is similar to a payday advance, but it comes with much more manageable repayment terms. They also typically have lower interest rates and a smaller total payback amount as a result.
Short Term Loans vs Payday Loans Ontario
Most online payday lenders do everything in their power to give applicants “instant” access to cash money. This process gives the customer a chance to get approval for their loan before they’ve even thought it through. The instant payday loan is a favorite tool of payday lenders, and it’s one of the reasons they make seeing your banking history a requirement. Online payday loans make it that much easier to sign up quickly and fail to notice any hidden fees.
#2: Personal Loans
This type of loan can describe money a person borrows for almost any reason. You can get a personal loan from your bank or any number of other lenders. This doesn’t necessarily mean turning to your family for money, or hitting up your friends. Personal loans are a legitimate means of borrowing from financial institutions.
These come with their own issues, though. The cost and availability of personal borrowing in Ontario creates a problem for both borrowers and lenders. People often find themselves in debt and unable to pay back, and lenders end up paying the price when borrowers default and aren’t able to make payments on time. The solution is to borrow responsibly, and to ensure that your repayment terms and your budget are realistic.
#3 Lines of Credit
A line of credit is an excellent source of emergency cash when you need it. Lines of credit work like credit cards, but they usually have lower interest rates. They also tend to be less flexible (as in, you can’t do your online shopping with them), but for some people that’s a good thing. Contact your bank or financial institution or credit union to look into more information about lines of credit and whether or not they’ll work for you.
In Canada, you almost always need a good credit history to get a bank loan. But many people don’t have the credit score they need. That’s because a good credit score takes years to build. You need to have a history of applying for, paying back, and using credit. What’s a person to do if they need a loan right away, but don’t have the credit rating to get one? A line of credit might just be the right answer.
#4: Credit Card Advances
If you have a credit card, getting a cash advance can be as easy as hitting the nearest banking machine. If you need money in minutes and don’t mind the generally high interest rates, borrowing from your credit card company can make sense.
Of course, if you’re unable to repay on time, this can potentially lead to bad credit quickly, not to mention high interest rates. Ultimately credit card advances are intended for emergencies and should only be used in dire situations.
#5 Secured Loans
A secured loan is by definition a loan in which you put up something valuable as collateral as a type of guarantee that you will pay it back. If you have something of high value such as property or an expensive vehicle, some lenders may extend you a loan “secured” by the valuable item you contribute.
Secured loans can be ideal on one hand, but they only work if you know for certain that you can make the repayment on time. Otherwise you could end up both without money and without one of your most valuable assets.
You might be surprised to learn that there are multiple federally-regulated lenders who specialize in loans for people with bad credit. Whether you’ve filed for bankruptcy or are simply looking for a loan to pay off some lingering debts, secured loans are an option.
Which Alternative is Right For You?
Over the past ten to twelve years, Canada has seen growth in the number of payday loan companies operating nationally. While it is true that they are convenient, providing quick access to money, it is important to remember that they come with an interest rate that can cripple your finances. That’s why it’s so important to select a lender that can offer you the right terms and conditions for your unique situation.
Which of these alternatives is best? That’s up for you to decide. This article and this website is designed only to provide relevant information where people might otherwise not be able to find it. We’re not offering advice or making recommendations, just providing information and pointing to resources.