A payday loan can assist Canadians facing a short-term cash crunch obtain money. Canadians can obtain a payday loan on the strength of their next paycheque costing them anywhere from $15 to $23 per $100 borrowed, excluding any fees and interests.
There are two reasons why a Canadian might resort to obtaining a payday loan. Firstly, they have a one-off major expense. Secondly, they face a negative cash flow situation where their monthly living expenses exceed their monthly household income.
Before consumers obtain a payday loan they may want to ask themselves the following:
1. Do I have any assets which I can sell?
2. Do I have any expenses which I can eliminate?
3. Do I have any expenses which I can defer?
4. Do I have any expenses which I can pay monthly instead of on a one-time lump sum basis?
5. Can I reduce my current living expenses?
6. Can I reduce my current transportation expenses?
7. Can I increase my household income?
8. Would I be in a better financial position if I were to make a consumer proposal?
By consumers asking themselves these questions and reflecting on the responses, it will help consumers rely less on payday loans. Payday loans are costly so it is important that consumers use them responsibly.