The Quick Fix Trap: Understanding High-Interest Emergency Loans

Emergencies have a way of hitting people at the worst time financially, and the danger is that quick cash may be inevitably irresistible. With an abrupt vehicle repair, an unplanned hospital allowance or other immediate home expenditure, majority of Canadians resort to cash advances. This is where what is oftentimes described as high-interest loans for emergencies comes in to save the day, or rather make things worse. They provide a breath of relief for a while but it is vital to appreciate the inherent perils and repercussions of such items which are usually promoted in the cities of Canada such as Edmonton and also Lethbridge and Medicine Hat, where some channels seeking to help out often include of Edmonton, Lethbridge, Medicine Hat payday loans.

Such short-lived costly financial alternatives are primarily there to tide someone over till they get their next salary. They have small principles, are due in extremely short periods (such as two weeks to a month) and notably with very high interest rates and additional charges. But while there is regulation to limit the cost of credit in different provinces, the effective APRs for the said loans can easily reach triple digits, far much higher than anything the banks or credit cards would charge.

Their effectiveness is tied to their affordability. Unlike standard lending institutions, those that provide high-interest emergency loans do not always require the applicants to have many qualifications. They rarely conduct in depth background checks on their customers, and so these are tailored for people who have bad credit or no credit histories. The application’s process is normally fast, more often than not completed online, and guarantees that cash will be credited into one’s account within a few hours or a day. And it is this shear speed and simplicity of access to funds, that makes them grossly appealing at times of crisis. However, this accessibility is at a cost, a heavy cost for that matter.

To a person living in Edmonton, Lethbridge, Medicine Hat and who is suddenly in need of cash due to unforeseen circumstances, the presence of these loans is like salvation. However due to their nature of activities, they tend to create a depression in to which users keep falling and to such a point where they can't help themselves. Borrowing $300 to pay for an urgent expense might seem like the best option. This methodology however comes efficacious when one considers average bets of around $50 potential debts where interest climbs rapidly. Or if not, then a “refinance” or an extension will be necessary and this will of course have its fees too. And it looks easy though the total rolls increase and greater borrowing is paid out in the process. Instead of paying off the $45 charge in one go, the charge could be reused several times over and more than pay the cost of the 300 borrowed.

Consumer advocacy bodies along with financial literacy institutions and experts within Canada advise customers not to seek loans like these under any circumstances. They point out that the many charges accrue even more painfully towards the poorer members of society, especially those without credit or those on social care. People who need money fast will always prioritize the upfront costs rather than the long terms one which leads to defaulting some bills, credit scores worsening among the other stress factors.

Rather than take on high interest emergency loans there are other options that this should be looked into such as:

Emergency Savings: Even having just an emergency fund could save one from borrowing at high costs.

Loans from Credit Unions: Credit unions are easier to join and they have much cheaper small and short term loans compared to the predatory money lenders.

Employer Cash Advances: Some employers do provide payroll advances to their employees to be able to cover them.

Local and State Programs: Fund charities such as local food banks or state agencies are able to provide assistance with such costs.

Payment Troubles: Creditors are sometimes contactable and a settlement or extension plan reached.

To that end, while the thought of seeking a financial bailout, especially in Canadian towns and cities such as Edmonton, Lethbridge and Medicine Hat, may be extremely resourceful, most of these "easy payout" loans end up as a debt pit instead of a clean break in the tough times. Acknowledging the real charges and seeking practical based on the positive strategies is key in order to save oneself from debts.