Payday loans are a convenient way to get cash fast when time is of the essence.
The fees are higher than with a traditional loan, but that is the price you pay for fast and easy processing.
Additionally, payday loans are short-term, low-value loans, so the higher interest rates are almost negligible. For example, if you get an online payday loan in Canada, you cannot borrow more than $1,500.
In Alberta, the maximum a payday lender can charge is $15 for every $100. If you borrow $1,500, the total amount you must pay back is $1,725 (typically between 42 and 62 days). You can count on these things if you go to a licensed payday lender, so make sure that you do.
Here are other things to expect when you take out payday loans.
Contrary to popular belief, a payday lender will not simply hand you a wad of cash for the asking. You must prove that you can pay it back. Typically, you must prove that you have a regular income, a bank account, and a permanent address.
If you go to a physical store, you will need to fill out an application form. You will do the same for an online payday lender, except you will fill up an online form. It might look something like this:
You can expect feedback on your loan application within a few minutes to an hour. The payday lender will ask you to fill up a pre-authorized debit form if you get approved. The form will allow the lender to withdraw the loan amount plus fees from your bank account on the due date. Some lenders may require a post-dated cheque instead.
Transact only with licensed payday lenders, especially if they require a pre-authorized debit form. You are giving them access to your account, so you need to be careful. Do your research before applying for a loan with an online payday lender.
Depending on the location, you may be able to cancel your loan. You can pay back the money without interest within two days after signing the loan agreement. This is also known as the “cooling off” period.
Among the provinces that stipulate this include Alberta, Ontario, British Columbia, Quebec, New Brunswick, Manitoba, and Prince Edward Island. Furthermore, payday lenders may be required to provide a cancellation form.
You can usually find the cancellation form on the last page of the loan agreement.
Payday lenders may hand over cash or deposit to your bank account once your application goes through. Some lenders might only deal with a prepaid card, which might mean paying extra to use it. With online payday lenders, you will typically receive your money through your bank account.
The loan agreement stipulates all the loan conditions. This includes what you need to pay and when. Make sure you understand all the terms of the agreement before you sign. If there is anything you don’t understand, don’t hesitate to ask.
Payday lenders in Canada operate under strict regulations, whether online or in a physical location. However, many are not licensed and not over-scrupulous over following the rules. Transact only with licensed payday lenders and pay on time to avoid any problems.