Month : March 2014

Money Management

5 things about Pay Day Loans you should know

Pay day loans are taken out by all sorts of people to cover all sorts of expenses.  Here are five facts you should know about pay day loans in Canada before you take out a pay day loan.

1.     In Canada pay day loans are strictly regulated

Canada has laws in place to protect consumers from unscrupulous pay day loan practices. These laws have been commended by other countries which have perceived problems with the pay day loan industry.  A pay day loan is permitted under section 347.1 of the Criminal Code of Canada.  However, the provinces need to enact their own specific legislation.   Most provinces have put into place specific laws to regulate pay day loans, these include, a cap on the amount of interest which can be charged.   You should therefore check what the rules are for your province and ensure that your choice of pay day loan provider complies with its legal obligations towards you as its customer. 

2.     They should be avoided by people who are struggling with debt

If you have problems with your debt and are thinking of using a pay day loan to shift a debt from one creditor to another you may end up making your problem worse.   Pay day loan providers expect to be paid by your next pay day (or whatever date you set for the repayment of the loan).  If you are late with repayment this will cause you problems:  for a start the interest rates charges by pay day loan providers are not intended for long term borrowing so you are likely to end up further and deeper in debt.   It can become difficult to break the debt cycle.   If you have problems with debt you should consider seeking help from an organisation like Credit Counselling Canada. 

3.     Consider your other options

Pay day loans are not the cheapest way to borrow money.  Consider all your options.  Clearly if you have savings this is likely to be the best way to fund an emergency purchase.  You may also have a credit card or a pre-authorised overdraft.    Bear in mind however that even if a pay day loan is not the cheapest option it may be the most suitable for your circumstances.  Some of the key advantages of taking out a pay day loan is that they are quick, have virtually no paperwork and are accessible 24/7.   Whether you need a pay day loan or can use some other, equally suitable, cheaper form of borrowing will depend on your circumstances.

4.     Shop around

Not all pay day loan providers are the same.  Use a lender who sets out all its fees and charges in a clear and easy to understand way.  For example, the sliding scale as provided by http://wonga.ca.    On this lender’s website you enter the amount you wish to borrow and the number of days you wish to borrow for and you will immediately be told how much you will be charged in interest and fees.  Do not be tempted to borrow more than you need to and set the number of days you borrow for at a level which is as soon as possible (but realistic). 

5.      Read the terms and conditions

Hopefully you wouldn’t enter into a long term loan without understanding all the implications – Just because it can be quick and easy to get a pay day loan don’t ignore the terms and conditions.  Check you understand the terms of borrowing and what exactly you are getting into before you sign up.   If you are too keen and discover something you are not happy about remember that pay day lenders will have a very short period of time in which you can cancel an agreement if you change your mind.  The cancelation period will differ from province to province but is around one or two days. 

Money Management

9 Tips to Help You Become Financially Fit

checklistHere are some tips I’ve learned through the years that will have a good financial impact on your life. Feel free to do them all or 1 or 2. Just be sure to do something to get your financial life on the right track.

Spend Less Than You Make

This is common sense advice and a pillar of personal finance. If more is going out than coming in then you have a problem that needs to be fixed.

Cut out Extravagancies

Do you really need a 52 inch Hi Def TV or a Coach purse? No, you really don’t. It’s like when you’re a kid and you see something shiny you say “oooo shiny, I want that”. It’s pretty much the same thing but on a more expensive level. I promise you’ll live with out it and be much better off using that extra money to pay down your debt, put into saving, or save up for your child’s education.

Make a Budget

Just seeing where you money goes can help you realize “Wow, I spend that much money on that”. It’s a lot more eye opening when you actually see where your money’s going versus where you think your money is going.

Let Time Work for You

Compound interest is amazing. It works for you by growing over time. The more you add to it the more it will grow.  So open up a retirement account a start contributing to it.

Save Your Extra Income

Whenever you receive a bonus check, a tax refund or a raise just put it into savings. Pretend like you never received it and you won’t miss it at all.

Contribute to a Roth IRA

Open up a Roth IRA today and start contributing to it. The money you contribute is after tax and any interest you earn isn’t taxed if you start taking it out after the age of 59 1/2. You are able to take out the principle amount early without penalty if you need to, but you should have an emergency fund for that.

Get Free Money from Your Employer

If your company matches your 401k contributions be sure to at least contribute up to what they match otherwise you’re losing that benefit and free money. Plus that compound interest will work here as well.

Have an Emergency Fund

This is used for emergencies only. I repeat, Emergencies only. Start with whatever you can and start contributing to it monthly so that it eventually builds up to 3-6 months of expenses. The important thing is that this makes you feel secure so that you don’t get stressed out because you hit a bump in the road of life.

Reward Yourself

It can be tiresome saving every penny so buy yourself something every now and then to give you a break. Just be sure you don’t go crazy and ruin all that you have accomplished.