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What are Payday Loans?

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Do you know what are payday loans? This is a very expensive type of loan that is best avoided. Here’s why… 

Do you evaluate the possibilities of borrowing and ask yourself what are the payday loans? According to the Financial Consumer Agency of Canada, the loan is a short-term loan, usually within 14 days, and you agree to pay when you receive the next salary.

These loans allow you to borrow between 30% and 50% of your home income, and are contracted to private companies that usually require evidence that you have a regular income, a bank account, and a permanent address. The lender will sign a contract giving you the costs, various fees, interest rate and maturity date. The fee is paid by a subsequent check or a prepayment (direct withdrawal from your bank account).

Make sure you can go back

Make sure you can go back

Make sure to lend the amount you can pay back: if you can not return to the due date, you will have additional payment fees and interest will continue to accumulate on your loan. To return the money you owe, the lender can contact the collection agency, and you can even find it in court. If you often have difficulties in fulfilling your final obligations, the form of loan that your cash payment should not be an option: it is better to hire a credit counselor to help you find the best possible solution. to solve your problems with money.

Using a payday loan as the last resort

Using a payday loan as the last resort

Payday Loans are a very expensive way of borrowing. Indeed, the interest rates are very high: According to FCAC, in January 2012, a $ 100 loan in two weeks cost $ 25 in Nova Scotia, which would be equivalent to the $ 650 annual interest rate. %! So, you have every interest in trying to find other solutions, such as borrowing money from a loved one, asking for a prepayment on your salary, or postponing certain purchases.

Also check with your financial institution if you are eligible for another form of credit: credit line, overdraft or cash payment. These forms of borrowing have much lower fees and interest rates than credits for payday loans.

Learn about your rights

Learn about your rights

Now you know what your payouts are. However, before you remove it, check out your local consumer information offices and the rules that lenders have to follow. Some provinces (Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Quebec, Saskatchewan) regulate payments with a maturity date. Specifically, they determine the maximum cost of the cash loan and the maximum penalty for returned checks or the pre-authorized debit is rejected (amounts vary from province to province). They also provide a cooling period (one or two days) during which the loan can be canceled without charge.