Why Many Single Moms are Turning to Payday Loans

Raising children is a gift for many women across the world. Ensuring their welfare is both a privilege and responsibility. A beauty titlist once said that the essence of being a woman revolves around loving and caring. Many will agree, but nurturing children can be more challenging as they grow up. 

The struggle is greater for single moms as they have to juggle their work and family duties. More often than not, going solo on expenses can be more challenging. It is no longer surprising to see them hustling to provide for their children. Hence, they are more inclined to look for instant borrowings like payday loans. 

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Payday Loans in a Nutshell

Payday loans are instant loans that you have to pay on the next payday. In general, these are unsecured loans or uncollateralized loans. Meaning, lenders can’t run after your properties should you fail to pay. But, interest rates are higher than bank loans and credit cards. 

Payday loan lenders have always been subject to trenchant criticisms. It is often referred to as loan sharks and predatory lending. Despite the stinging words of the critics, the industry remains legal and growing. 

Why Single Moms Turn to Payday Loans

Nurturing is natural for most women. As such, many single moms carry a greater toll on taking care of their families. In a study conducted in Canada, about 4% of the total Canadian households have payday loans. It also shows that a single-parent household is six times more likely to use payday loans. Female-led households use payday loans more to suffice their needs. 

In essence, payday loan approval is faster than bank loans. If there are emergency expenses, you can borrow what you need in just a few hours. In banks, it will take a few days and even weeks to secure approval. Here are the reasons why single moms may consider payday loans as an option. 

No Income Requirement

In Canada, 4.2% of the population are those earning below $10,000. It may correspond to the 4% of Canadians with payday loans. The other 5.6% are marginal but remain below $20,000. It was also found that female lone-parent households are more susceptible to poverty. More than a quarter of female lone-parent households are within the poverty line. It is way higher than in couple families with only 7.2%. 

In general, the minimum salary to get a credit card is 12,000 CAD. In comparison, payday loan lenders do not set an income requirement to apply for loans. As such, you are qualified for payday loan approval even if your income is lower than $10,000. But, they still have to assess it to determine the amount that you can borrow. 

Taken from Statista

Instant Approval

In bank loans and credit cards, approval takes a few days and even weeks. In contrast, payday loan applications only take a few hours to get approved. You are qualified as long as you are at least 18 years old with a job and an active bank account. 

It is advantageous to single moms, especially if there are emergency expenses. Children are more vulnerable and may get sick when you least expect it. Miscellaneous expenses in schools may also affect your budget. With that, you may consider applying for payday loans and pay them on the next payday. 

Loans are Unsecured

Payday loans are often uncollateralized. It means that if you can’t pay your borrowings, lenders can’t take your properties as collateral. Yet, you have to be mindful of interest rates and penalties so you won’t have problems paying. 

Interest rates can reach 60%, although the average interest in Canadian payday loans is 17%. But, some payday loans bear lower interest rates without hidden fees. 

Bad Credit is Not an Issue

Bad credit scores are common among solo parents. As such, they may have a hard time getting bank loan approvals. It can’t be avoided since they tend to fall behind on payments. Meanwhile, payday loans can help you if you have bad credits. Even with a low credit score, you are still qualified for one. Most lenders are not concerned about your credit score but your capacity to repay. 

Credit Repair

As a single mom, you may also want to increase your credit score for better borrowing prospects. Thankfully, online payday loans can do credit repair for you. If you continue to pay your payday loans on time, it will help you increase your credit score. With that in mind, you may borrow what you need and further improve your score. 

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How to Avoid Financial Distress Amidst the Pandemic

The pandemic has caused an upsurge in business shutdowns and unemployment. Given the economic uncertainty, here are some tips to secure your finances. 

Take Advantage of Government Assistance and Tax Benefit

The crisis affected millions of Canadians. If you become unemployed, you may apply for government assistance for single parents. Check if you are also entitled to other benefits like tax credit and Canada Child Benefit. For further information, just visit the official website of the Government of Canada. 

Track Your Expenses

If you constantly track your expenses, you will determine what you need to manage more. Doing so will help decrease your spending and save for more important expenses. You may try to list everything on spreadsheets or use finance apps for your budgeting. 

Pay Your Loans on Time

Paying Loans on time helps you prevent extra fees, penalties, and higher interests. 

Get Financial Advice 

If you have a friend who is good at handling finances, you may seek their advice. If you can’t manage your borrowings, you may talk with a licensed financial professional. In that way, they may check your finances and give you debt solutions. They may change your budgeting method and give you options that will fit your situation best. 

Try to Earn More

They say that earning more is more efficient than saving more. As a single parent, you may work as much as a couple, so you don’t have to under spend. Instead, you will have more means to pay your borrowings and save. Doing freelance jobs or having a side hustle may help you. 

Given the many bank loan requirements, payday loans remain a good option for everyone. In their absence, those living near the poverty threshold will have no one to turn to. Payday loans continue to help single parents, especially with the current economic changes. Indeed, it is more challenging to provide for your family. But even as single parents, you are doing a great job.