People take out payday loans for a variety of reasons, but mostly to cover emergency expenses such as urgent home and vehicle repairs, household appliance repairs, electrical problems, outstanding bills and others. With rising prices and inflation, more and more Canadians are struggling to keep ends meet. Cash loans help borrowers pay bills and avoid late payment penalties and charges.
What Are Online Payday Loans?
A payday loan is a form of short-term financing repaid when the customer gets his next paycheck. Consumers are asked to write a post-dated check as a guarantee of timely repayment. Some lenders offer small loans with very high interest rates and terms varying from 2 weeks to 2 months. The easiest way to apply for an instant loan is online. Many providers advertise no credit check, online applications, and instant or quick approval. It takes days and even weeks to get approved for a regular loan, and banks usually require a solid credit history to get approved. This type of short-term loan is offered to individuals who need urgent cash. It is a last resort for debtors who have exhausted all other options for financing. On the downside, the high interest rate adds to the cost of borrowing, meaning that consumers pay a lot in fees and charges. Another problem is that this is a temporary solution and not a long-term solution to major financial problems. On the good side, short-term loans are convenient and easy to qualify for. There are established and reliable providers, from small establishments to franchise and large chain providers. Some providers actually operate much like brick-and-mortar banks. Many issuers offer handy tools such as status updates, account reminders, due date notifications, extension notifications, and others.
What You Need to Know When Applying for Payday Loans Online
Providers offer loans to individuals who are employed, have a checking account, and are of the age of majority. Proof of income is required as a guarantee of payment. Customers fill in their contact and personal information, including their mobile and home phone, time to call, time at current address, and whether they own or rent. Identity verification information may be required as well. With some providers, clients are asked if they are currently considering or filing for bankruptcy. Note that the due date and other details are included in the agreement. Late payment fees apply in case of failure to pay by the due date. Consumers who apply for an online payday loan write a check for the amount requested and sign an agreement. They also pay a fee for the service provided. Once the loan has been paid off, clients are free to reclaim the check. The fees, repayment terms, and rates vary by location.
What Is the Law in Canada Regarding Payday Loans?
Cash loans are legal in many Canadian provinces, and providers operate in accordance with provincial regulations regarding interest rates and fees. The maximum charges and fees vary by province but there are caps on the rates charged by providers. Manitoba has enforced restrictive caps, with lenders charging rates of up to 17 percent of the principal. In contrast, Nova Scotia set caps at 31 percent. Saskatchewan, Alberta, and British Columbia have set the maximum rate at 23 percent. Payday loans are prohibited by law in Quebec and Newfoundland. The cap is set at 25 percent in Prince Edward Island and Nova Scotia. Under federal law, the cap is at 60 percent meaning that the annual rates are limited to 60 percent. Bill C-26 was enforced to change the criminal interest rate and addresses loans by organized crime and predatory lenders. Basically, rates above 60 percent are criminal under section 347.1 of the Canadian Criminal Code. Borrowers are also protected under the Canadian Payday Loans Act which prohibits rollover loans and sets interest rate caps. In addition, the contract can be cancelled within two workdays without incurring penalty charges. In accordance with the Payday Loans Act, lenders are required to disclose information such as the interest charges (what you will pay), the term or length of the amount borrowed (number of days). These details must be present in the financing agreement. Providers must not accept or request payments by means of automatic deduction. Lenders are not allowed to contact acquaintances, neighbors, friends, and family members at any time. They are prohibited from using excessive pressure, threatening language, and other abusive and intimidating practices.
Canadian Payday Loan Providers
There are established Canadian fast loan providers such as Money Mart, Zippy Cash, Maple Loans, and others.
Maple Loans offers short-term loans to applicants who meet the minimum income requirements and are Canadian residents. The interest rate and amount offered depend on the customer’s individual circumstances. Consumers are asked about their employment history, including pay frequency, length of employment, monthly net income and job title, next payday, and so on. Clients also fill in banking information such as type of account, bank account number, institution number and name, as well as transit number and time at bank.
This is another instant loan provider that advertises instant approval, online application, and cash conveniently and safely deposited into the customer’s bank account. The loan amounts vary from $500 to $1,500. A point system is used to determine the amount customers qualify for. Early repayment options are available, and there are no early prepayment penalties. Individuals who are unable to repay their loan are offered alternative repayment arrangements. Persons who fail to notify the provider may face collection procedures.
Money Mart offers loans to individuals in six provinces – Saskatchewan, Ontario, Nova Scotia, New Brunswick, British Columbia, and Alberta. The loan amounts vary from $120 to $1,500. The interest rates vary by province. For example, borrowers pay $17 per $100 in Manitoba, $23 per $100 in British Columbia, $21 per $100 in New Brunswick, and $25 per $100 in Nova Scotia. Customers can apply for one loan at a time. Only consumers with a valid photo ID, active phone number, proof of steady income, and valid checking account qualify for a financing.
Dollars Direct also offers cash loans of up to $500 to new clients and up to $1,500 to regular and returning customers. Borrowers enjoy quick application and approval, and funds are deposited into their bank account. Financing is offered to residents of British Columbia, Saskatchewan, Ontario, and Alberta. Two payroll methods are accepted, by check and through direct deposit. Applicants who are employed and are of legal age meet the criteria. The rate offered varies by province. The term varies from 8 days to 40 days and the due date is usually the next payday. Early prepayment options are available, and no penalties or fees apply. There are different payment options, through the customer’s bank account, by wire transfer, prepaid card, credit card, pre-authorized withdrawal, money order, and personal check.
Operating in Ontario, Alberta, and British Columbia, Wonga is a reputable short-term loan provider that advertises instant decision making, secure application, and no hidden charges. The rate offered varies by province, for example, borrowers in Alberta pay $23 per $100. The loan term varies from 1 to 45 days, and consumers can borrow up to $400. Customers benefit from an easy-to-use online calculator that shows the total amount to pay. For example, if you borrow $300 over a 14-day period, you will pay a total of $330, including interest rates and fees, and if you borrow $400, you will pay $492 in 45 days. To apply for a loan, clients specify their marital and housing status, gender, and employment status (on benefits, retired, homemaker, temporary employment, full-time, etc.)
Unfortunately, some lenders are dishonest and unscrupulous and use illegitimate practices so it pays to check who you are dealing with. One of the main criticisms is that payday lenders use predatory practices and target low-income individuals, families, and communities, immigrants, and the elderly. Lenders target the working poor, single parents, and people who desperately need cash. Loan sharks are also said to target vulnerable students and minorities and persons with poor financial literacy. Another problem is that loan sharks use harassment and other illegal and abusive practices such as blackmail, threats of violence, and aggressive and abusive collection practices. Predatory lenders use threats of court and law enforcement action and make abusive calls at any time of the day. Deceptive advertising is yet another problem. The outrageous interest rate offered by some providers is also a major concern. Some issuers offer loans with triple-digit and even four-digit interest rates. Some payday lenders repeatedly attempt to collect their dues and borrowers incur insufficient funds fees. While unsecured loans are easy to get if you are employed and have a bank account, borrowers often fall into a debt spiral, especially if they are already in a financial jam. Ease of access is a source of concern, and debt-ridden individuals are often tempted to use quick cash to solve their financial problems. Some payday lenders fail to disclose their annual interest rates and finance charges and use vague wording and complex financial terminology. Fortunately, in their majority, the lenders are reputable and accredited and offer clear guidelines and information on eligibility, criteria, rates, fees, and other details. One of the reasons is that many providers depend on repeat borrowers to make profits.