#FinancialFridays: Online Lending and the Lending Ladder

In our Financial Friday Blog for March 15th, we shared one of our one-page resources, The Lending Ladder. We asked Dan Girardi, an Insolvency Trustee with MNP, where he would place Online Loans. This is what he said.

“As with many businesses today, payday lending has moved online. That is in essence what online lending is about. Payday loan regulations were developed around the concept that lenders and borrowers existed in the same community and the same province in physical premises. Non-compliant lenders could be found, fined, and held accountable. In the online world, that’s impractical- if not impossible. A borrower looking for a payday loan online may find a lender licensed in their province or an unlicensed lender located anywhere in the world.

The growing threat posed by unlicensed lenders has been a focus of provincial reviews in many provinces including Ontario and each review identified uncertainty about the current state of online payday lending.

In summary, online loans are just payday loans with added issues of online security and other trappings.

I would put online loans on the bottom rung of the ladder.

It’s easy to get a loan but with very high interest rates. They also provide no or negative ratings for people’s credit reports.”

Thank you, Dan, for sharing your knowledge and expertise!

If you would like to talk about your options for dealing with debt, reach out to Caroline who runs our Financial Literacy Program.