The payday loan allows you to borrow money against a promise to repay it when you receive your next pay or your following regular income.
In Ontario, you cannot get a payday loan of over $ 1,500.
Most lenders do not do a credit check before granting a payday loan. Typically, they ask the person:
- to prove that she has been employed for three months;
- provide them with proof of address, such as a utility bill;
- provide them with information about their checking account.
The payout period for a payday loan is short: it varies typically from 14 to 28 days. The longest time you can get is 62 days, for about two months.
When a payday lender agrees to lend you money, you must sign a loan agreement. By doing so, you agree to repay the loan, as well as the interest and fees charged by the lender.
Payday lenders apply a rate of interest, and the costs much higher than banks, credit unions, or issuers of credit cards. If you need money for a short period, be aware that it would cost you less to use your credit card.
Until your payday loan is paid off, you cannot get another one.
Usually, payday loans have to be repaid in one go at the end of the loan term. But if the loan you are applying for is your third or more in 63 days, the lender should offer you an extended payment plan.
You must know how payday loans work before you sign a loan agreement. For example, you should know clearly:
- what is the amount you borrow;
- what is the amount you have to repay;
- how many days you have to refund this amount;
- how you should refund this amount;
if you can terminate your loan agreement.
Before applying for a payday loan, think about other possible solutions. For example, you could consult a credit counselor from a nonprofit agency. This could help you establish a plan for repaying your debts.
Payday loan: what is it, what are the risks, and what are the other options?
Payday lenders apply a rate of interest, and the costs much higher than banks, credit unions, or issuers card credit.
This is why payday loans are risky: they can make your money problems worse. This is what happens to many people who choose this solution.
If you do not repay your payday loan on the due date, here is what the lender can do:
Add late fees and interest, which will make your investment even more difficult to repay. Some lenders may charge an interest rate as high as 60% if you do not repay your loan on time. Always read the terms of your agreement for the applicable interest rate.
Send your file to one, so that she can arrange for you to repay the loan. This will hurt you, and later you will have trouble borrowing.
Go to the Small Claims Court. If the lender wins, the court could allow him to take some of your money or property. It could also let him take part of your pay. This is called wage garnishment.
The lender cannot give you another loan as repayment of your payday loan.
No doubt, Payday loan is the best solution for getting emergency funds. But it can be so risky in some situation. If you have caught in payday trap you can seek help for your payday loan consolidation