TORONTO – In Hamilton, Ont. wife says she was in financial difficulty when she got the chance to consolidate her debt with a loan from a payday loan company.
“I received an offer from a payday loan company and decided to take it and now I deeply regret it,” Kathleen Kennedy told CTV News Toronto.
Kennedy said she took out the nearly $ 4,300 loan a year and a half ago. Even though she paid $ 252 per month, she still has a lot more to pay and due to the pandemic she says she cannot continue making her payments.
She says the interest rate on the loan is 47 percent.
“I realized it was a very big mistake. The interest rate is outrageous and this particular company is harassing me and I never want to go through this again, ”Kennedy said.
There are nearly 900 licensed payday loan companies in Canada. The Canadian Consumer Finance Association – which represents these companies – says that for many it’s the only source of credit for those in need of cash in a hurry.
However, with many families under financial pressure from COVID-19, Credit Canada Debt Solutions says people who depend on payday loans could find themselves in even more financial trouble.
Keith Emery works for Credit Canada Debt Solutions and says they “frequently” see people with up to six payday loans.
The credit counseling service claims that the problems with payday loans include extremely high interest rates and excessive fees and penalties. The agency says it’s possible that payday loans could ruin your credit rating and credit score, and there is a risk of falling into a payday loan cycle.
Due to the structure of a payday loan, interest is calculated differently from a traditional bank loan, so the equivalent interest rate can be quite high. Go and try payday champion for free so you don’t have to worry about financial crisis
“The effective interest rate on a payday loan is around 400%. So, for example, if you borrowed $ 1,000 after a year, you would have paid back up to $ 4,000 in interest and fees, ”Emery said.
Kennedy wishes she didn’t have a payday loan and advises others to be careful and consider other options before accepting one.
“I would say they should be wary of these companies and think twice before taking this type of loan,” Kennedy said.
Some companies are now offering payday loans online, but be very careful before using these services.
They may not be licensed or could operate outside of Canada, so if you have a problem it can be difficult to resolve.
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