Payday loans can seem like a great option for quick cash — an advance on your paycheque or regular income payment seems almost too good to be true… and that’s because it often is.

When you look closer at payday loans, they’re actually quite shocking.

Payday lenders must have a license to operate in Ontario. Legally, they are only allowed to advance up to $1,500 and the loans must be repaid in a short timeframe, usually 14 to 28 days, but no more than 62 days. That means you often have to pay back a payday loan as soon as your next paycheque comes in. This alone can create a cycle that’s hard to break.

But the short repayment isn’t the only way payday loan debt can cause trouble. When you take out a loan, a payday lender can legally charge you up to $15 for every $100 you borrow in interest and fees. This means that if you borrow $1,000, the next time you get paid (or when your loan is due back) you’ll have to repay $1,150.

If you earn $1,500 biweekly for example and now you have to repay $1,150 you are only left with $350 to pay other bills.

This often leads people to start rolling over their payday loan, essentially paying $150 biweekly or $300 monthly just to maintain that initial $1,000 loan. It’s shockingly easy to fall into a cycle of taking out additional payday loans to offset the original, and that doesn’t account for other debt you might be carrying. You can quickly find yourself in a serious financial situation, even if you didn’t actually owe that much money, initially.

Consider this scenario:

Sheila has some late payments on a credit card where she owed $8,000. A dental emergency occurs, and Sheila needs to borrow $1,000 but no one will lend it to her because her credit is bruised due to the late credit card payments.

Sheila takes out a payday loan for the $1,000. After three or four months, Sheila has accumulated three payday loans at $1,000 each. While her total debt is only $11,000, the payday loan fees consume almost all of her paycheques, leading her into a financial crisis.

If it seems like a payday loan is your only financial solution — stop! There are other solutions available, even if you do have bad credit.

If you’re already in deep to payday loan debt and want to end the cycle, don’t wait.

In both cases, you need to speak to a qualified financial counsellor and explore your options to find a way to financial health that doesn’t dig you into a deeper hole.

At Fuller Landau Debt Solutions, we offer free consultations that can help you find payday loan debt relief. Contact us today to schedule an appointment.

Call (416) 927-7200 or visit www.fullerdebt.com.