TORONTO -- A Hamilton, Ont. woman says she was having financial difficulties when she received a chance to consolidate her debts with a loan from a payday loan company.

“I got an offer from a payday loan company and decided to take advantage of it and now I deeply regret it,” Kathleen Kennedy told CTV News Toronto.

Kennedy said that she took out the nearly $4,300 loan a year and a half ago. Even though she has been paying $252 per month, she still has much more left to pay off and due to the pandemic she says she can no longer continue to make her payments.

She says the interest rate on the loan is 47 per cent.

“I realized it was a very bad mistake. The interest rate is outrageous and this particular company is harassing me and I don’t ever want to go through this again,” Kennedy said.

There are close to 900 licensed payday loan companies in Canada. The Canadian Consumer Finance Association -- which represents those companies -- says for many, it's the only source of credit for those who need money in a hurry. 

However, with many families under financial pressure due to COVID-19, Credit Canada Debt Solutions says people who rely on payday loans could end up with even more financial problems.

Keith Emery is with Credit Canada Debt Solutions and says they “frequently” see people with as many as six payday loans.

The credit counselling service says problems with payday loans include extremely high interest rates and excessive fees and penalties. The agency says it’s possible that payday loans could ruin your credit rating and credit score and there is a risk of falling into a payday loan cycle. 

Due to the structure of a payday loan, interest is calculated differently than a traditional bank loan so the equivalent interest rate can be very high.

“The effective interest rate of a payday loan is somewhere in the neighbourhood of 400 percent. So for example, if you borrowed $1,000 after a year you would have paid back up to $4,000 in interest and fees" said Emery.

Kennedy wishes she had not taken out a payday loan and advises others to be cautious and to consider other options before agreeing to one. 

“I would say they should be very wary of these companies and think hard before taking this type of loan" said Kennedy.

Some companies are now offering payday loans online, but be very cautious before using these services. 

They may not be licensed or could be operating outside of Canada so if you have a problem it may be difficult to have it resolved.