Are You Eligible for a Payday Loan in Canada?
Payday loans have been a lifesaver for too many people to count. When you don’t want to get into a complicated contract with the bank and you don’t want a big loan, you turn to payday loan providers.
However, if this is your first time, things may seem a lot more intimidating than they actually are. It’s simply because you’re not aware of what goes into successfully utilizing and paying back such a loan.
You can gather information on payday loans as much as you want on our website. This particular page will explore the eligibility requirements for these loans. We’ll shed light on whether you can claim any bonus or not based on your financial roadmap.
When it comes to Payday loans in Canada, there are many available options. Under tough situations, people may feel so hopeless that they miss out on the fact that loans for individuals with bad credit are not impossible. İn the present article, we provide you with the necessary information to help you regain your hope!
What is a Payday Loan?
Before we dive into the world of eligibility, it only makes sense for us to go over what a payday loan is.
According to all definitions, a payday loan is a small amount of money that you borrow from a lender in agreement that you pay it back on your “payday”. Now, a payday can be the day you get your salaries as well as the day when your accountant balances the ledgers.
These are fundamentally different from bank loans because you’re usually not required to go through the paper trail, credit checks, and whatnot. You can even get a loan in as little as a day!
Are You Eligible for a Payday Loan?
The million-dollar question. Can you get such a loan? What do you need? That’s what we’re about to explore in this section of our guide. Pay Attention because we’re about to break the journey down into steps.
Does Your Province Allow Payday Loans?
As you’re living in Canada, you’re not a stranger to the vastness of this country. Even cultures change when you move too far away from your province! So, it’s only normal for different provinces to have different regulations regarding these short-term loans.
Thankfully, availability is something you don’t have to worry about as payday loans are legal across all the provinces. The only thing you need to look up in terms of your geographical location is how much you can secure in loans.
Across all the provinces, the maximum loan you get from a Payday loan provider is capped at $1,500. The APR (Annual Percentage Rate) is calculated as per the $100 borrowed.
Please note that the Independent territories like Northwest, Nunavut, and Yukon have the highest APR which is $60 per $100 borrowed! Newfoundland and Labrador have the 2nd highest APR, $21 per $100.
For most of the provinces, you cannot take the loan for more than 62 days, with a high-interest rate, of course. Keep in mind that most provinces only allow one loan at a time.
Some provinces like Alberta, offer a range between 42 days and 62 days, allowing you to choose how long you want the loan for.
The loan amount is ultimately determined based on how much you make. The average APR range is $15 per $100.
In almost all the provinces, the cooling off period is 2 days (48 hours). In the world of finance, a “cooling off” period refers to the free cancellation period. If you cancel the loan request within 48 hours, you won’t have to pay any charges.
Some provinces allow lenders to access the borrower’s bank accounts for background checks while others restrict it. You can find the entire guide on your provincial government website. If we were you, we’d start there.
The bottom line here is that you must know how long you get to pay the loan back. If your paycheck doesn’t allow you to pay the loan back in time, it’s best to avoid it. Because once you start missing the dates, interest rates will increase exponentially!
Your Source of Income
Just like any other loan, one of the first things you need to provide is proof of your income. And it must be regular. The easiest way to approach this is to submit a few months of recent pay stubs. Or, a contract that validates your employment also works.
One of the best things about payday loans is that your income doesn’t have to be very high. These are short-term loans and most people who go for these loans have a limited income anyways.
You Have a Bank Account
In most cases, the loan amount will be directly transferred to your bank account. Some organizations may still operate like the old days where you get a check or cash. But you’ll still need a bank account to pay the loan back to the lender.
This practice is known as pre-authorised debit. It means the lender can directly withdraw the loan amount from your bank account on the due date.
You Have Other Documents in Order
Sure, providing pay stubs to prove your income is a great way to start the negotiation with a payday loan lender. But that’s not the only document you’ll need. You’ll also need your government ID, proof of address (copy of utility bills), and bank account details.
The Interest Rates in Payday Loans
The APR we’ve been hinting at is actually the interest rate for the loan you take. It’s no shock that you have to pay interest on any borrowed money. As payday loans are easily accessible and the decline rate is very low, you end up paying a lot in interest. You already know that the average interest rate is 15% in Canada!
It’s essential that you figure out a way to pay back the loan even before applying for it. Otherwise, your outstanding debt will keep stacking without you even realizing it.
You need to keep in mind that a payday loan is the most expensive way of borrowing money. Let’s take a look at a simple example to see how the interest rate in payday loans works.
For a $300 loan at $17 per $100 APR, you end up paying $51 in interest for just 14 days! That’s close to a 442% annual interest rate!
In comparison, the overdraft protection on your bank account is a 21% annual interest rate, with a fixed $5 fee. Even credit cards beat a payday loan as you only pay 23% annual interest on a cash advance.
To conclude, finding a reliable source of payday loans is not very hard in Canada. And chances are, you’ll be eligible as long as your documents are in order. Just make sure you’re ready to deal with the high cost of these loans.