There’s one particularly good reason to stay away from payday loans: they’re painfully expensive. It’s not uncommon to see an annual percentage rate (APR) over 300% – and that’s following provincial regulations.
Before taking out a payday loan, look into alternatives.
Check whether your local non-profits can help with expenses such as rent and utility bills. You can also check your provincial and municipal websites for government assistance available to you. As an example, the Toronto Rent Bank provides grants to eligible Toronto residents who are behind on their rent.
Whichever province you’re in, you can visit 211.ca to get connected to the support you need.
If you’re a student, reach out to your school’s financial aid office and check whether you’re eligible for any student loans or aid.
Pay advance apps in Canada such as Nyble and Bree let you get a small loan, usually up to several hundred dollars. You pay no interest on these cash loans, but you may pay a monthly fee.
An installment loan is a type of personal loan offered by online lenders. You can typically get an installment loan quickly and with lower APRs and longer repayment terms than a payday loan. Instead of making one lump sum payment, you will make repayments in installments over a period of time. Lenders may look at your credit score when you apply, but they will more likely be interested in your ability to repay your loan.
An installment loan is a decent payday loan alternative because it’s often offered to the same type of customer as payday loans.
Best installment loans in Canada
Try a bank or credit union first, but if you can’t get approved by one, you may be able to get one from an online lender. With a line of credit, you can borrow up to a limit and pay interest on the amount you borrow. It’s a decent payday loan alternative because of its open term, thus allowing flexible repayments.
A credit card has a much lower interest rate than a payday loan. If you’ve already maxed out your credit card, try to see whether you can increase your credit card limit before you get a payday loan. Your credit card provider may be able to approve the increase if you have a solid history of on-time payments.
If high-interest debt is holding you back from meeting your other financial obligations, you might benefit from consolidating that debt. This means borrowing a larger sum of money to pay off multiple debts, then focusing on paying off that one loan. Consolidating your debt reduces the confusion of having multiple payments and may even offer a lower monthly payment while you eliminate your debt.
Best consolidation loans in Canada
A credit card cash advance is cash borrowed from the credit limit of your card. Cash advances aren’t always the best option because of their high APRs, but if you’re in urgent need of funds, the fees and terms may be better than those of a payday loan. It’s often better to take the high interest rate of a cash advance that you can pay off over a longer term.
At the end of the day, your creditors want to get paid, and they may be willing to work with you to ensure that they do. Contact them and tell them you’re having trouble keeping up with your debt. They may help you create a repayment plan or extend your due date to ease your financial burden. You’d be surprised how many lenders are willing to help you work through your tough financial situation.
A credit counsellor can help you create a budget and a debt repayment plan. The main benefit to credit counselling is solving the structural issues that led to your financial problems in the first place, whether it’s your lack of budgeting, your low income or your overspending.
Call Credit Counselling Canada for free financial counselling (Monday-Friday 8:00am-5:00pm at +1 866-398-5999). It may be hard to see the light at the end of the tunnel right now, but we recommend investing a bit of time to organize your finances through counselling. The effort you spend now on this payday loan alterative will pay off over the long run.
A cosigner is a friend or family friend whose finances are in good shape. By cosigning the loan application with you, they act as a guarantor. If you default on your loan repayments, they are on the hook to cover those payments on your behalf. This is a legitimate payday loan alternative if you can responsibly manage your repayments.
Personal loans with a cosigner
It’s not for everyone, and sometimes debt relief companies can do more harm than good. However, if you’re truly facing financial hardship and even considering bankruptcy, then a debt relief company is a legitimate payday loan alternative. A debt relief company can help you come up with a solution to reduce and manage your debt.
Debt relief companies in Canada
A secured loan is a loan backed by collateral. There are many types of collateral you can use, such as your home, car or jewelry. A secured loan is a legitimate payday loan alternative, especially if you’re looking for lower rates, but if you default on your loan, the lender can take your asset.
It can hurt your pride, but it’s worth asking your friends or family to help cover your short-term financial needs. They may be more than happy to lend a hand. This payday loan alternative often has the advantage of zero or low interest, but you should focus on repaying your friends or relatives promptly.
An overdraft protection is a service offered by your bank that allows you to withdraw more than what you have in your bank account.
You may be able to take out a small loan with a credit union. Credit unions are known for offering loans at great rates. Furthermore, they’re often more willing to look at additional approval factors besides finances when extending loans, such as how long you’ve held your account with them. If you can qualify, this is a better payday loan alternative than other loans with high interest rates.
Examples of credit unions that offer small loans as a payday loan alternative include Vancity and Servus.
It can be an uncomfortable conversation, but you can politely ask your boss for an advance. Choose a time when your boss is calm and relaxed and when your company’s revenue is at a high point. Ask for a one-on-one meeting. Offer to repay by your next payday, but if this isn’t possible, come prepared with a clear repayment schedule. Also, offer to work more hours or pick up extra shifts in exchange for the advance.
Search your place for any items you could sell on Facebook Marketplace, Kijiji or Craigslist. To protect yourself, accept cash only and arrange to meet up with the buyer at a police station. Some police stations have a “Buy and Sell Safe Exchange Zone” specifically for this, but if there’s no mention of on their website, you can still call and ask if there’s an area you can use.
If possible, try to pick up a side hustle rather than take on more debt. There are various ways to make money from home without financial investment, including filling out surveys, providing virtual assistance and freelancing.
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