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Often people face a situation when they urgently need to cover expenses, but they don't have enough money. In this case, the bank can come to the rescue by providing a payday loan. A payday loan in Canada is designed to cover urgent and minor expenses.
The amount and term allow you to repay such a personal loan in one payment, which is deducted from regular income. Unfortunately, the major disadvantage is an inflated interest rate. Payday loans with high interest rates are usually the last resort for Canadians who cannot get a personal loan from traditional sources, like banks.
What is a payday loan?
A payday loan is one of the most popular financial solutions in Canada. You can borrow a small amount from a week to a month if you need money for urgent spending. There is an option to apply for a payday loan online, and the funds will be transferred to your bank account, electronic wallet or in cash. When choosing, consider the amount and term, interest rate, requirements for borrowers and other conditions.
Borrowers are people with insufficient incomes, a problematic or missing credit history, and those living in remote settlements where there is not always a bank is present. In Canada, about 12 million people apply for a payday loan yearly. Seven out of ten make payday loans to pay for basic expenses. The most payday loans amount is $1,500.
Customer requests are processed automatically, so the time for their consideration can be from an hour to two days. When receiving a payday loan, the payday lenders may not request additional documents.
Currently, you can arrange this type of loan even via the Internet. Therefore, it is worth turning to such a solution in emergencies, but you should remember that it should be done wisely. Don't take a payday loan that significantly exceeds your monthly income and don't delay repayment until the last minute. In addition, before taking out such a loan, check the integrity of the company offering such services and carefully read all the loan terms.
Pros and cons of payday loans
The major advantages of payday loans
Apply any time. Online services allow you to get funds when you need them.
Money is being disbursed around the clock. The transfer will be sent to an electronic wallet or card, so a personal visit to the office is not required.
No paperwork. The list of the necessary documentation is minimal. In most cases, one passport is enough. You do not need to present a certificate of income.
Instant registration. The application is filled out and processed much faster than in banks. The money is transferred immediately after receiving approval. Often everything takes about 30-60 minutes.
High approval rate. When it comes to small amounts, a positive response comes in 98% of cases.
Availability. Banks make more loyal demands on their customers. Age restrictions and bad credit history will become obstacles to receiving money. However, minor delays and a low score do not guarantee a rejection.
Cons of payday loans
The rate is ten times higher than the bank rate. In the bank, you can get insurance in case of illness or disability. Whatever happens, you have to pay back to payday lenders.
Most Canadian payday lenders do not allow gradual repayment. If the entire amount is not paid simultaneously, penalties will be counted for it. Penalties are stricter than in banks. For the day of delay, you have to pay about 10% of the loan.
Small amounts and maturities. On average, you can take no more than $1,500 for up to two months.
How to choose a payday lender?
It is essential to choose the right payday lender. For example, a contract with a bank often entails strict obligations that each party must fulfil. Therefore, you must determine what is essential for you: reliability, profitability, availability of offices, or online application.
It is also worth discovering whether the bank you have chosen provides the service you need. If you want to increase your capital, you can not go to the bank to open a deposit, but contact an investment company or even an insurance company. The profitability of many financial instruments is higher than a bank deposit, and they are also reliable.
Decide where to borrow. There are two most common options with their characteristics: a bank or a credit union. If you have time left, an excellent credit history, and you can quickly provide all the necessary documents, contact the bank. The bank will give you money for two months at a percentage that will be noticeably less than a loan from a financial consumer agency.
If you do not have time or are not sure that the bank will approve the loan for you and the small amount is needed for a short time, you can contact a credit unions.
Even if you need money urgently, take your time and don't make hasty decisions. Evaluate the offers of different companies. Although the payday loan is issued for a short period, keep in mind that it assumes a high interest rate. Weigh up whether you are willing to overpay so much.
Do not forget that a payday loan works for you only if you take it for a short period. The faster you pay it off, the less money you will have to pay from your budget. More recently, to receive a payday loan, it was necessary to personally visit the bank, submit an application and documents, pass an interview with the manager, and expect a positive response. This registration method exists even now, but it is losing popularity every year because of unreasonable time costs.
Today, almost everyone has received express loan offers issued directly in a store or shopping centre. At the same time, credit specialists usually require only a passport. This scheme is very tempting for customers. The client can buy anything immediately, without long waits, and then gradually pay its cost in contributions to the bank. But this scheme has a serious drawback — the loan rate in these cases is significantly higher, sometimes several times.
The most convenient way at the moment is to apply online through the bank's website, followed by receiving cash or a credit card at a branch of a credit institution. It takes a minimum of time. The bank checks all the documents provided in the cash advance and informs the exact amount and interest rate. The client only has to arrive on the right day to conclude the contract and receive money.
Also, specify the total cost of the loan and request a repayment schedule. This information must be provided to you by the bank's employees. Read the contract's text, be incredibly attentive to the presence of ambiguous wording, and the correct spelling of the amount, maturity dates and interest on the loan.
Additional payments are not specified in the repayment schedule. For example, commission for reviewing an application, issuing a loan, or using a credit card for early repayment. A frequent condition for issuing online payday loans is life and health insurance, which will also require costs.
How to apply for a payday loan?
The advantage of a payday loan is the possibility of registration anywhere at any time. There is no need to stand in queues to collect a large package of documents. Credit organizations strive to reduce the load on offices and simplify the procedure for obtaining financial products. They provide complete information about credit programs on the website and credit calculator services. You can enter the desired parameters for the loan and determine the number of overpayments and monthly payments.
The loan agreement specifies a variable or fixed interest rate. Typically, you get a loan at a certain percentage, and it does not change until the personal loan is fully repaid. Payday loan services reserve the right to raise the rate in case of bad credit history, but they warn the borrower about this.
The application procedure includes several stages:
Choosing a suitable loan option;
Familiarizing with the payday loan agreement;
Creating a personal account on the organization's website;
Submitting a payday loan application online;
Waiting for a response;
Getting money after approval.
Also, be ready to provide the following set of documents:
Bank statements;
Proof of residence;
Proof of employment;
Borrower's questionnaire.
With minimal customer requirements, you can take a small amount for a short term period. However, if you expect a larger loan, you must provide additional documents to clarify your income.
The funds are transferred to a debit card issued to the borrower. There are other ways to get money. It is an electronic wallet. Some banks offer delivery of the card by courier if the borrower does not have a plastic carrier.
You can fill out applications for several offers and wait for the approval. However, it is undesirable to apply for several payday loans simultaneously due to the high financial burden, so after receiving the lender's response, choose the most profitable of the approved options.
To confirm the request, managers usually call the client back. The borrower can ask questions about the conditions, penalties, and registration. After all issues are settled, the funds are credited to the client's card. The borrower can freely dispose of the borrowed money. It is not necessary to confirm the purpose of their use.
Ways to pay back payday loans
To pay off the debt, you can use:
A bank card;
An electronic wallet;
Payment in cash;
Payment by bank account;
A money transfer system;
Communication salons that are partners of creditors;
Terminals located in shopping malls or other points of the city.
Bank cards are the most often means used for both to receive funds and to return them. Therefore, this payment tool is convenient to use for conducting payment transactions. In addition, through the bank's mobile application to which the card was issued, you can track the payment status.
After the payment is completed, it is necessary to log in to the personal account of the credit institution, where you can ensure that the debt has been repaid. Then, if necessary, the user can order a certificate confirming fulfilling obligations under the contract.
Here are some recommendations for managing your financial resources:
Before taking out a loan, pause and think about how much money you need, whether you can manage without it, and how you will repay the amount received. Consider not only your salary, pension or other income sources, but also unforeseen circumstances. For example, dismissal, illness, or crisis can dramatically worsen your financial situation. Therefore, it is essential to consider how to cope with loan repayments in such conditions.
Read the entire contract. It will save you time and money in the future. Carefully study all the conditions for the issuance and repayment of the loan. Pay attention to commissions, penalties for late payments, and additional requirements — for example, insurance.
Compare the prices of competitors. The same loan costs differently. The difference can reach tens of percents. An item can be even cheaper in online stores due to the absence of rent fees and staff costs. Use discount cards. They will allow you to save additional funds. If the card is cumulative, then sooner or later, you will get bonus points.
Choose the moment to purchase a product or service. For example, installing an air conditioner at the peak of heat can cost twice as much due to high demand. Therefore, you can save a lot if you consider the installation in a cash advance. The same goes for clothes. If you are not chasing the purchase of a fashion collection in the season, then you can save your hard-earned.
Do not keep money in quick access. So you can easily spend. Cash withdrawals are better dosed. It is not necessary to withdraw the salary from the card entirely. Otherwise, you will pay it faster. Even walking to an ATM can become an obstacle to impulsive purchases. And if the money is placed in a savings bank account, then psychologically, it will be even more difficult for you to withdraw it from there. It has been accumulated and postponed, which means it is inviolable.
Legal regulations of payday loans
All provinces of Canada support payday loans. Keep in mind that each region regulates such payday loans based on the legislation of each region. Therefore, the payday loan agreements may differ.
Payday loans in Canada are regulated by article 347.1 of the Criminal Code. A prerequisite is the place of the registration of the borrower. Many provinces have different requirements for issuing online payday loans. Payday loans cannot be extended. The maximum amount that a borrower can apply for is $1,500 for 62 days.
The true cost of payday loans
Penalties for late payments are also an essential point of the contract that must be considered. Of course, it is better to avoid getting fines, but you should know exactly how much you will have to part with if circumstances turn out that it will not be possible to make the next payment on time.
It's not easy to get into debt for the first time. After all, a payday lenders always pay attention to your credit history. If you do not have it or if it is wrong, the bank has every right to refuse you to agree. In addition to overpayment, there are also various commission payments. It's good if they are directly spelled out in the contract, and you know about them.
For example, in Canada, late payment penalties are imposed if the borrower has not made a loan payment on time. In the case of consumer loans, the second method is more often used. If you cannot deposit the monthly amount on time, it is better to call the payday lenders in cash advance - most likely, they will meet you halfway. Otherwise, you will most likely have to pay a percent of the amount of delay for each day of delay.
When choosing a payday lenders, some payday lenders charge a fee even just because they give you a loan — this is the so-called commission for issuance. Additional payments for account maintenance are also possible. When signing a contract, always pay attention to the footnotes under the "asterisks" — it is there that additional interest on a consumer loan or extra payments can be "hidden".
