What to expect when you take out payday loans
Payday loans are a convenient way to get quick cash when time is of the essence.
Fees are higher than with a traditional loan, but that’s the price you pay for quick 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 a payday loan online 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 need to repay is $1,725 (usually between 42 and 62 days). You can count on these things if you go to a licensed payday lender, so make sure you do.
Here are some other things to expect when taking out payday loans.
You must prove that you can repay it
Contrary to popular belief, a payday lender won’t just hand you a wad of cash for asking. You must prove that you can repay it. Generally, 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 out an online form. It could look like this:
You can expect feedback on your loan application within minutes to an hour. The payday lender will ask you to complete a pre-authorized debit form if you are 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 check instead.
Only transact with approved payday lenders, especially if they require a pre-authorized debit form. You give them access to your account, so you have to be careful. Do your research before applying for a loan from an online payday lender.
You can cancel the loan within two days
Depending on the location, you may be able to cancel your loan. You can repay the money without interest within two days of signing the loan agreement. This is also called the “cooling down” period.
Some of the provinces that stipulate this include Alberta, Ontario, British Columbia, Quebec, New Brunswick, Manitoba and Prince Edward Island. Additionally, 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.
You get your money almost immediately
Payday lenders can remit money or deposit into your bank account once your application has been accepted. Some lenders may only deal with a prepaid card, which may mean paying extra to use it. With online payday lenders, you will usually receive your money through your bank account.
You must read the agreement
The loan contract stipulates all the conditions of the loan. This includes what you have to pay and when. Make sure you fully understand all the terms of the agreement before signing it. If there’s anything you don’t understand, don’t hesitate to ask.
You should only deal with approved lenders
Payday lenders in Canada operate under strict regulations, whether online or in a physical location. However, many aren’t allowed and aren’t too scrupulous about following the rules. Only transact with approved payday lenders and pay on time to avoid any issues.