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December 14, 2021

Payday lenders gear up for busy holiday season

Retailers are reporting mixed results leading in to the final days of Christmas shopping, but there's still one sector that is expecting to do big business this month: payday lenders who offer low-dollar, short-term, high-interest loans to the most vulnerable consumers.

Payday loans are designed to tide borrowers over until their next pay cheque. The amount you can borrow is usually limited to 50 per cent of net pay, at interest rates that make credit cards look like a real bargain.

These loans then trap borrowers in a cycle of mounting debt. Charges escalate when the borrower is unable to repay the loan at the end of the month, or can repay but immediately needs to borrow the same amount again.

Some consumer advocates even think they payday lenders should be legislated right out of business. But there are ways to protect yourself. As a consumer, you have rights, for instance.

Proponents of payday loans claim that forcing them out of business will hurt those who need help and have no other place to turn for short-term lending solutions. They also argue that loans aren’t actually as onerous as their opponents charge.

But whether or not these loan centres should exist, they’re certainly becoming more and more popular, particularly around the holiday season.

If you're tempted, the Center for Responsible Lending offers these alternatives to payday loans.

  • Working out a payment plan with creditors
  • Asking for an advance at work
  • Finding a community-based emergency assistance program
  • Getting a loan from a credit union
  • Getting a cash advance from a credit card

Have you ever used a payday loan service? Would you describe yourself as a regular customer? What was your experience? 

By Gordon Powers, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...