Canadian Payday Loans

Payday loans, which are also known as paycheck advances, are a fast and convenient way of obtaining cash in case of emergency. To secure a payday loan, borrowers must present a photo ID, a bank account statement, and a proof of steady income, e.g. payment stubs. In the typical case, they must also write a check to the lending organization, which will be cashed in if they fail to repay the loan in person on the date of maturity. The average period for which payday loans are taken out varies between 10 and 15 days, and they are expected to be settled on the day when the borrower receives their next paycheck. Once a loan application has been processed and approved, the borrowed sum becomes available for use within 24 hours (some companies even pay it out immediately after the application is made in person). This speedy provision of credit makes payday loans quite handy when it comes to covering sudden, unexpected expenses. Most companies do not require that customers have a good credit history and do not check their credit report.

Payday loans in Canada are normally in the amount of $100 to $500, but some Canadian payday loan lenders offer larger sums – between $1000 and $2000. The borrower pays between $15 and $25 for every $100 borrowed, even if the sum should be repaid within a week. There are no restrictions as to what to use the loan for as long as you are able to repay it.

The majority of payday loan borrowers are 18 – 34 years of age, men, urban residents, and living in Manitoba, Saskatchewan, Alberta, and British Columbia. Most of them have some post-secondary education, and their annual household income is less than $30,000. Canadians resort to payday loans for a variety of reasons. The most widely cited is emergent need of cash, together with the more convenient working hours of payday loan providers. Other reasons include bankruptcy and poor credit history, not having a bank account, and the convenient locations of loan providers. For one or more of these reasons, 10 per cent of the Canadians resort to payday loans more than once a month.

Since 2006, each Canadian province has been responsible for regulating the lending companies that operate on its territory. In British Columbia, for example, payday loan companies are subject to the following restrictions and limitations: the maximum charges for a payday loan, including interest and other fees, must not exceed 23 per cent of the principle; borrowers cannot take out more than one payday loan at the same time; no sums bigger than 50 per cent of the borrower’s next pay can be loaned out; settlement of the loan before the borrower’s next paycheck is not allowed, etc.

Last June, the Government of Saskatchewan stated that it would introduce payday loan regulations similar to those of British Columbia: limitation of the loaned sum to 50 per cent of the borrower’s upcoming paycheck, up to 23 per cent cost of borrowing, which, however, may increase to 30 per cent on a defaulted loan, and a license fee for lending institutions to the amount of CAD $2,000.

Although the regulations enforced in Alberta and the other provinces are not unlike those stated above, it is always prudent to check what particular rules are applicable to your place of residence before you sign for a payday loan. By acquainting yourself with your rights as a borrower, you will be able to avoid any of the unlawful dealings, e.g. excessively high interest rates and processing fees, which lending companies sometimes resort to.