12 Things About Payday loan That May Surprise You

What is a Payday Loan?

A payday loan is one type of short-term loan, which you could borrow up to $1,500. Borrowers could cover a cash shortfall fast and easy, and they are expected to pay the loans off as soon as they receive their next paycheck. If a payday lender could not get their cash back on time, your cost of borrowing could go higher since more fees and interest rates could be charged.

Understanding Payday loan

While the borrower is expected to pay the loan back as soon as they receive their next paycheck, many of them end up doing the opposite. People often do not pay their loans back on time and they will find themselves stuck in financial trouble.

Despite the unplanned cost of borrowing could be highly possible to be accumulated, payday loans are legitimate in Canada with regulations in place. In fact more and more Canadians are turning to payday loans, according to the Canadian Payday Loan Association, nearly 2 million Canadians use payday loans each year. This is seen as an easy gateway to access cash that could fix their money-related problem.

How Payday Loan Work

What to provide.

Payday lenders can help get you a direct contact link when it comes to getting bigger loans. They have a wide network of trusted and reliable money lenders who have been in the business for a long time. These lending institutions have various options that you can easily pick and choose from. Privately-owned companies offer loans physically in stores as well as online payday loans, which are more convenient and faster to apply. When you are ready to apply for the cash which you really need, you’ll need to supply lenders (whether it is online or not) with proof that you have a:

Regular income

This is very important to prove that you are capable of paying back the cost of borrowing.

Bank account;
Permanent address in Canada

You will also submit a government-authorized ID to prove you are old enough to be eligible for the short-term cash.

Getting money.

Normally the payday lenders will deposit the money into your bank account or give you cash directly, while in some exceptional cases, prepaid cards could also be offered, extra activation fees will also be included in your cost of borrowing.

Paying back a payday loan.

The majority of payday lenders utilize the automatic withdrawal option, where the money gets taken out from the borrower’s account automatically to recover the loss of the payday lender.

Also, there are times when the bank of the borrower will not allow the lender to withdraw the total payback from the borrower’s bank account. In this case, the lender will divide the total payback into smaller amounts of cash and try again. However, fees might result in additional charges against the borrower, by both the lender and also the bank, which means the cost of borrowing is going higher.

Online Payday loan

To apply for online payday loans, all you need to do is to fill out an online application form and you are good to go. The best part is that you are not only saving time but also saving yourself from a lot of hassle that you otherwise would have to go through when applying for a loan. Your application online could be approved in few minutes and you will get cash in your account by e transfer within hours. For short term loans of up to $1500, this is often a perfect situation without worrying about a credit check

You’ll Never (and should never) Pay anything in Advance for Payday Loan

The best thing about a payday loan is the fact that you do not have the burden of paying anything in advance. If the payday lender is legitimate, they will never ask you for an advance payment. All you need to submit before getting the money you need is filling out a form and providing a post-dated cheque for the total loan amount.

No Credit Check to Get Payday Loans Approved

Your past financial mistakes won’t come back to haunt you when you apply for a payday loan. For many people with bad credit scores, their request could also get approved and they would be able to borrow the cash they urgently need, as long as you have proof that they can cover the total payback (initial cash and cost of borrowing).

Same-day Cash for A Payday Loan

This can depend on the lender, however, chances are that your loan will be approved on the same day you applied for it.  Amounts could also vary since it is largely according to how much money you earn monthly in the past.

Payday Loans are Only Great for Emergencies

One feature that makes payday loans stand out is the fact that you have the option of paying them back when you receive your next paycheck. Therefore, when you are in urgent need of money—urgent car repairs, dental emergency, health emergencies, and more-you cash shortfall could be covered fast and easy with short term loans, and you will be able to pay it back once you have a substantial amount in your bank account. However, if you are thinking about getting them for ongoing consumption, like rent, grocery, or some daily entertainment, please stop!

There is Little Room for Fraud in Payday Loans

With a payday loan, you can be sure that you won’t encounter as many scammers as you may come across from other quick loan businesses. It is also easy to spot fraudsters, as payday loans require little personal information. So if a payday lender asks for too many details, you know that you are being scammed.

No Security Deposits Required for Payday Loans

On top of not having to pay anything in advance, you won’t have to pay any deposits. Without the security deposits, you can receive up to $5000 at a time from payday lenders, an amount that could be helpful in several types of situations.

Why You Also Need to Consider Payday loan

High-interest rate.

Even though many Canadians are taking payday loans as an option to jump out of their money-related dilemma, the high-interest rates could lead to a higher cost of borrowing and thus increasing your financial stress or even sometimes personal issues. Sometimes, the cost may be equivalent to an interest rate of 500-600%. What’s even worse is, you may have to pay extra fees if your pre-authorized debit account doesn’t go through.

A Could-be Never-ending Loan Cycle.

It turns out that for many borrowers, payday loans create an unexpected massive amount of debts. The growing debts just make it harder and harder to pay the loan back, sometimes they have no other options but to take out payday loan after payday loan, trying to catch up and pay off the previous loans.

 The Amount of Cash you could borrow is limited.

Like what we have discussed at the very beginning, you can only access a limited amount of cash, which usually ranges up to $1,500, which may not necessarily meet your needs.

Suggestions on How to Pay off the Payday loan

  • Try to extend your payment plan. Some payday lenders provide this option, while it could be different when coming to how much more time you could have.
  • Apply for a payday loan only for URGENT SITUATIONS! Payday loans are aimed to cover a very short period cash shortfall with borrowers’ proper ability to pay them back. Please don’t use them for ongoing costs such as rent, groceries, or utility bills. Remember: payday loans are not ideal under such circumstances and will bring you trouble with great possibilities!
  • Understand the payday loan agreement as well as local regulation rules. Be sure to find out all the fees (charges and interest rates) that could be included, when the loan is due, and more.

 

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References

https://www.self.inc/blog/pros-cons-payday-loans

https://www.creditcanada.com/blog/payday-loans-the-good-the-bad-and-the-ugly?hs_amp=true

https://www.experian.com/blogs/ask-experian/how-payday-loans-work/

https://www.canada.ca/en/financial-consumer-agency/services/loans/payday-loans.html

https://www.moneyunder30.com/payday-loan

http://www.cpla-acps.ca/english/mediabackgrounders2.php