Despite talk about the bustling economy there are dark clouds emerging in the form of insolvent borrowers using payday loans in Ontario. Their numbers have grown for the sixth consecutive year.
The use of such loans are indicative of a looming problem that needs to be addressed soon.
An insolvency trustee firm Hoyes Michalos & Associates says 31 per cent of insolvent borrowers used the loans in 2017, up from 27 per cent the year before.
The study suggests payday loans are a growing factor in personal insolvencies in Ontario, with struggling debtors are taking out fewer but larger loans despite recent changes to lower borrowing rates.
Since Jan. 1, 2017, the provincial government reduced the maximum amount lenders can charge for a payday loan to $18 for every $100 borrowed, down from $21 for each $100. Earlier this year, the rate was further reduced to $15.
In total, insolvent borrowers owed an average of $3,464 from all their payday loans, the study says, or $1.34 for every dollar of their monthly take-home pay.
If you are in a precarious financial position and close to insolvency, here are a few steps you can take.
Budget and financial advisors can give you a better understanding of where your money is going. They’ll help you with tips and ideas on how to cut out unnecessary costs and reduce expenses. There are free services available.
Ask a budget advisor or financial advisor for suggestions on how you could manage your debts (e.g. by combining them or by paying a lower rate of interest).
Ask them for help to negotiate with your creditors.
Talk to a mortgage broker to see if you can get a better deal on your mortgage.
Life happens and insolvency can hit even the fiscally responsible. A sickness, death or a tragedy could very easily undo years of financial planning, sometimes there is simply too few good options. – CINEWS