What is a Payday Loan?

Date posted: Sept. 10, 2015

Sometimes, no matter how hard you try to prevent it, you will sometimes find yourself in a financial pinch. Maybe your car broke down, the refrigerator went out, or the furnace stopped working right in the middle of a cold snap. Although it is ideal to save your money for large purchases like this, sometimes the urgent nature of the situation does not allow it. Fortunately, payday loans exist to help you get cash when you need it most.

The Basics of Payday Loans

A payday loan works on the premise that a lender will provide you an amount of cash (usually a direct deposit) for a short period, and then withdraw that money plus any applicable fees directly from your bank account on your next payday. The entire process is quite simple in nature, and it takes about 15 to 30 minutes to set it all up. In many cases, lenders can make money available to you on the business day following the date of your approval.

What Information Will You Provide to the Lenders?

In order to get a payday loan, you will need to provide some basic information to potential lenders. This includes your full name, address, and telephone number, information about your employer and income, and information about your bank account. The lender will use this information to determine the amount of money you can pay back once you receive your paycheck, and they will offer you a sum based on their findings.

Is There a Credit Check?

One of the best things about payday loans is that there is no traditional credit check involved. However, the lender may check with non-traditional agencies to determine whether you have any history of serious overdrafts or delinquencies on your checking accounts and they may ask you to provide personally identifying information just to verify your identity.

What Are the Costs?

Since these lenders do not check your credit, they assume a great deal of risk when they lend to you. Because of this, you should expect to pay significant fees and interest. Canadian law limits the amount that the lender can charge you, but these fees are still incredibly high when compared to other loans. For this reason, you should only get a payday loan when necessary – and when you are certain that you can repay it on time.

Are Payday Loans Safe?

For the most part, Canadian law regulates payday loans in such a way that they are safe for consumers. This is different, however, when you apply for loans online. Be sure to research the lender thoroughly before providing any of your personal information on the internet, and make certain that you take the time to read the loan documents very carefully before you sign them.

There is certainly no denying that there are better ways to get money fast, but if you have an emergency situation and you need money in as little as one day, then a payday loan is one option that just about anyone can utilize, regardless of credit history. It is important to do it wisely to avoid any negative repercussions like exorbitant interest rates and late fees.

Check out more related content:

Credit Score book icon

5 Common Credit Myths

Published on: July 11, 2018

Continue reading

Saving Money book icon

How Money Motivates

Published on: July 11, 2018

Continue reading

Top Five Credit Score Factors book icon

Top Five Credit Score Factors

Published on: May 30, 2018

Continue reading