Think carefully before you apply for a payday loan
Credit to Author: Canadian Immigrant| Date: Mon, 03 Feb 2020 20:44:55 +0000
How informed are you about payday lending?
Payday loans are short-term loans with high-interest rates that are often available to people without or with poor credit history. When immigrants move to Canada, they arrive without a Canadian credit history. Unfortunately, even if they had a good credit rating in their home country, information is not shared between countries. And since establishing a credit history from scratch takes time, payday loans become an attractive option for newcomers.
What every newcomer should know
It is easy to get payday loans. Usually, they are approved instantly; do not require credit checks, documents or a co-signer; and they are disbursed quickly. However, because of their high-interest rates, these loans can be costly in the long run and difficult to pay back. Missing a payment or failure to repay the loan can have catastrophic consequences to your finances because you will be subject to a high penalty fee.
Payday loans are offered by private businesses not regulated by the government and do not help you build your credit. Payday lenders do not report borrower compliance to credit bureaus; therefore, borrowers cannot build credit or improve their credit score. Consequently, as a newcomer, it is crucial to think carefully before deciding that a payday loan is your best option.
Before getting a payday loan
As tempting as it might seem, there are a few things newcomers need to consider before choosing a payday loan.
Can you get money somewhere else? Ask friends and family if they can help you first. If what you want is to start a business or pay for education, training, assessments, credentials or licensing, a microlender can be your best option. They are non-profit organizations that offer smaller loans and typically require less documentation than banks and, depending on the lender, provide low interest rates.
Do you understand all the fees attached to a payday loan? Comprehending all the costs associated with payday loans is essential, especially the costs you would incur if you are not able to pay back the loan.
How informed are you on payday lending? Information is key. Familiarizing yourself with the laws and regulations on the topic could help you avoid predatory lending practices.
Educate yourself to make the right decision
It is expensive to settle in a new country, and savings often run out more quickly than anticipated. Payday loans may seem like a solution during a stressful, tight period but they can often create much more anxiety in the long run.
Interest charges by payday lenders are incredibly high. The costs of the loan can escalate out of control, and you could find yourself in a vicious cycle of taking out payday loan after loan. This is why it is smart to consider all other options before choosing this route.
More importantly, by educating yourself about personal finances and being aware of your rights and responsibilities as a consumer, as a newcomer, you can ensure you are making the right financial decisions. It would be easier for you to establish a good credit history while at the same time, managing your financial goals.