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Payday loans are short-term loans that are often marketed as emergency fund sources that can let the borrower take care of financial obligations until payday comes. It is often advisable to save some of your paycheck for such emergencies, but the reality is that this is difficult to do and it is easy to neglect saving for the rainy day. Thus, payday loans have emerged as popular solutions for those situations when something unexpected happens, such as the car breaking down or someone has to go to the hospital.

Be aware that payday loans can charge higher interests than banks

Because payday loan companies allow even consumers who have bad credit histories to take out a loan, they try to cover the higher risks with higher interest rates. The payday lending industry is also relatively new. Thus, regulations covering this particular industry segment are either new or absent. Loan companies may therefore have much more room in which to adjust their fees and charges. Fortunately, the federal and provincial governments of Canada are already taking measures to establish the rules and regulations for this industry.

Complaints against payday loans

Many people complain that such loans are actually targeted towards consumers who have bad credit. This observation may have some basis because people with poor credit histories cannot go to the bank and other standard lending institutions. Thus, payday loans may be their only source of emergency funds. However, the problem is that such consumers may have poor credit because they are not well-versed in money management. If that is the case, they are likely to be trapped into continuously getting a payday loan every payday.

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