There are seemingly countless forms of loan types to choose from today, making it harder and harder for prospective borrowers to decide which kind is best for them, especially in less clear-cut situations. When buying a home or maybe a brand-new car, the type of loan to choose is often obvious. In most cases, borrowers would elect to get a mortgage or an auto loan to finance the remaining principal of their balance.
There’s a bit more room for creativity and personalization when it comes to alternative sources of borrowing, though. If you need something under roughly CAD$1,500 for a small purchase like a new fridge, a medical expense, a home improvement project, or something similar, there’s a way of obtaining quick money for such purchases. One of the most popular alternatives to traditional lending is something called a payday loan.
What Is A Payday Loan?
Payday loans are called as such for a reason. It’s essentially a loan that’s relative to your next potential paycheck. These short-term loans are funds you acquire, with the payment expected to be taken out of your next paycheck. It could be a monthly or even a weekly deduction, depending on a lender’s requirements.
It’s probably safe to say that most borrowers have been wary of these or even told to avoid them, but there are safe ways to utilize these loans if you find yourself going this route. Payday loans are now more convenient than ever to apply for in many parts of the world. And now, you can even get online payday loans in Canada.
Whether or not payday loans are for you is a personal decision subject to your unique financial situation. If this ends up being your lending source of choice, this article will present an overview of everything you need to know about them, and how you can conveniently access them online.
Laws, Requirements, Repayment, And Expectations
In Canada, you can only borrow up to CAD$1,500 with payday loans. In the most populated Canadian provinces such as Alberta, Ontario, British Columbia, Manitoba, and New Brunswick, borrowers will have 62 days to pay back a payday loan. To qualify, lenders will typically require you to show proof of regular income, a permanent address, and a bank account to go with that.
When applying for a loan, lenders will usually require you to do one of two things to ensure their repayment. One is to sign and fill out a form that consents the lender to withdraw the total amount from your bank account when it becomes due, which includes the interest and fees. This can be referred to as a pre-authorized debit. The other is to provide them a postdated check to account for the loan and included fees.
After the application process has been completed and your loan is approved, the money will usually be disbursed through direct deposit or cash. In some rare cases, a prepaid card will be provided.
Interest Rates On Payday Loans
Payday loans are also known to come with significantly inflated interest rates, with even quality lenders offering rates much higher than your typical personal loan. It’s not necessarily a bad thing or predatory act; it’s mainly a security measure they implement due to the volatility these loans present. Payday loans have a history of being used by high-risk borrowers who have a tendency not to pay back debts, the reason they needed to resort to a payday loan in the first place.
Thus, lenders have to consider their bottom line when determining the rate of https://americashpaydayloan.com/payday-loans-mi/ interest to charge. It’s in their best interest to identify a relatively high interest rate to protect against the higher chances and higher frequency that borrowers won’t pay back their due amount.