The Canadian economy is slowly rebounding and is on its way to recovery. Despite such a positive outlook, however, the feeling of uncertainty still lingers due to the threat of the new Covid-19 variant. Infection and hospitalization rates are rising again, causing market fears.
A lot of people still remain unemployed and the cash they currently have on hand cannot cover their needs. Even worse, banks and other lending institutions have become stricter in their loan approvals. This is one reason why more and more people turn to payday lenders.
This article will take a closer look at these payday loans and how important these are to lower-income households.
Payday Loans During These Erratic Times
This latest pandemic has disrupted business operations everywhere, with some of the hardest-hit industries being transportation, travel, and retail. This has led to a reduction in production, company shutdowns, and even massive layoffs.
During this economic downturn, the Canadian unemployment rate peaked at 13%. And while interest rates were dropped to help manage the recession, loan applications remained difficult to get approved.
Many households face uncertainty as the pandemic continues to rage. At the same time, expenses and the need to borrow money increases with each passing day. The strict standards that banks uphold during these trying times further aggravate the situation.
Fortunately, payday loans are there to provide temporary relief from the financial burdens the pandemic brings with it. In a 2020 study in Toronto, 80% of respondents used payday loans to cover their basic needs.
As you can see, payday loans play a vital role in helping lower-income households cope with financial difficulty. The average cost of living in Canada is $4,553, with those living in the various provinces of Canada having varying costs of living.
Regular workers in the country who earn minimum wage can’t seem to cover their living expenses, no matter what province they’re from. This is probably why most of the people who utilize payday loans are these workers.
The Canadian Payday Loan Association reported a total of two million borrowers turn to these payday loans annually. This just shows that this type of quick loan remains a staple for many unemployed and underemployed individuals.
Things to Consider When Availing of Payday Loans
You have to consider some factors before going to the nearest payday lender in your area. Here are some of the important things you should know:
Varying Interest Rates
The interest on payday loans varies with each province. Although the average rate in Canada is 17%, some provinces impose higher interest rates. For example, in Nova Scotia, they impose a 19% interest rate while in Newfoundland and Labrador, 21% is the norm. In the Northwest Territories, the interest rates on what you borrow can go as high as $60 per every $100 borrowed.
In Alberta, British Columbia, and Toronto, the average interest rate is only 15%. This is ideal since these provinces have a higher cost of living (COL) than the rest of the country. So, if you borrow $800, you will only need to pay back $920. In other areas, however, you may have to pay at least $936.
Payday loans come with higher interest rates when compared with loans you can get from traditional lenders. That’s why it’s best to turn to these only in urgent situations. Lower-income households may gravitate towards these quick loans a lot but they do need to curb their spending when they do. Focus should be placed on their needs so they can budget the payout of these loans properly.
If you live in Alberta, the average monthly cost of living is $4,115. This usually covers the cost of food, transportation, housing, and preschool fees. The average COL in some cities like Calgary is $4,240, which is $125 higher than the rest of the province. Fortunately, you can get an online loan in Calgary to cover your needs.
Payday loans, unlike bank loans, are non-discriminatory and easier to get approved for in general. Employed or not, you’re welcome to apply for a loan in person or even on the internet. You don’t have to present any collateral for these loans. If you cannot pay these loans, no assets will be sequestered in lieu of the loan.
Approval is also fast since it only takes a day. You don’t have to go through the hassle of making follow-ups. Keep in mind however that the maximum loan amount you can make is only $1,500. The amount you get approved for will also vary, depending on your income and employment status.
Given this information, you can now see why payday loans are popular. One thing to remember though is to make sure the lender you approach is regulated and authorized so as to avoid problems. Spend your borrowed money wisely and pay on time so you can avoid penalties and higher fees.