Many people, including many financial experts have regularly criticized payday loans Manitoba as a poor financial instrument. Payday loans are also marketed by other names like payroll loans, salary loans; cash advance loans and payday advance loans. The critics of payday loans argue that the interest rates are very high and since these loans are available so easily, a borrower may be tempted to take up these loans and would then end up with mounting interest and other charges. The statement is completely true, but payday loans have been introduced in the market to help people handle urgent financial crisis. Abuse of anything, let alone payday loans, would always turn out to be a bad decision. Does this mean that payday loans Manitoba should be criticized? No. Borrowers should take the decision of taking out a payday loan responsibly and after considering other alternatives that they may have to arrange the finances that they urgently need.
Let’s take a closer look at the concerns that the critics of payday loans Manitoba have been raising. The first and the major concern is the astronomically high rate of interest that comes along with these loans. When a person has to borrow $100, he/she would have to pay $20 as interest on it. This is considering that borrowers usually pay back the loan amount in 20 days. That surely is very high because this works out to more than 300% annual percentage rate. We can compare this to traditional loans and say that the APR in case of payday loans Manitoba is very high, but essentially, payday loans and traditional loans are two totally different instruments.
Now let us make a comparison of the payday loans interest rate to other things that you spend your money on. Let’s say you are getting your vehicle repaired and the mechanic orders a part for you. At the wholesale price, this part may cost $100, but the retail price would be anywhere between $130 and $150 and can be even more. The mechanic had a very low risk that the part may be defected and he may have to repair it. In addition, the mechanic has to make a profit; he did about $50 in profit by selling you that part. Compare this to payday loan lenders, who take a huge risk on their money by lending it to someone who has a poor credit history and whom no bank would consider giving a loan.
We should get the reality straight; everyone is here to do business including the people who provide payday loans Manitoba. If they are taking such a huge risk by giving a loan to someone who may not be able to repay the loan, they should get returns on this risk too.
Now let’s take a look at the positive side of payday loans Manitoba. Every year, about two million Canadian citizens take a payday loan to take care of their financial needs. A lot of people in the country live from one payday to another, leaving little or almost no scope to take care of emergency financial needs like medical bills, a broken pipeline, leaking roof etc. At such times, putting food on the table also becomes difficult. Payday loans give such Canadians a ray of hope and a medium to handle their financial troubles. Traditional loans provided by bank cannot be used for such situations because they take about 15 to 20 days for processing. Payday loans on thither hand are deposited to the borrower’s bank account within one business day of the application.
Many people rely on credit cards to handle such needs, but there are also people who do not have a credit card and to make things worse, they may also have a bad credit rating, denying them any chance of getting a traditional loan. For such people, payday loans Manitoba are the best option to take care of a financial crisis when they are not prepared for one. Borrowers are always advised to proceed with caution when applying for a payday loan. They should not exploit the benefits that these loans offer and should consider other options that may not cost as much as payday loans Manitoba.