The statistics are in and collectively Canadian individuals owe just over $2.3 trillion dollars. That includes all forms of personal debt including credit cards and mortgages.
And the debt is growing. Two decades ago, the average person carried $12,000 of non-mortgage debt. Today that number is around $30,0000.
Which is why Canadians are looking for ways to lower their debt to income ratio. Unfortunately, sometimes unforeseen events happen and you need money fast.
A payday loan might be your best option. Since many people ask, “what do I need for a payday loan,” we thought we’d help you get prepared.
Keep reading to learn the documents needed to get a payday loan.
What Do I Need for a Payday Loan
While every lender has their own set of rules, the most typical payday loan requirements are that you must provide proof that you have:
- A regular income source
- A permanent address
- A bank account
- Be 18 or older
- Valid identification
Gather those documents before you head to get a payday loan location. Once there you’ll have to perform the following tasks:
Fill Out a Form
First, you’ll have to fill out a form that lets the lender withdraw the full amount of the loan from your bank account as soon as it’s due.
This is what’s known as a pre-authorized debit. Usually, the day you are paid is the day the loan amount is due.
Bring a Cheque
Not only will you have to sign a form allowing the lender to withdraw the money from your account, but you’ll need to provide them with a post-dated cheque.
Keep in mind that you are not only responsible for paying back the entire loan amount, but there will be additional fees you’re responsible for paying back.
Be Prepared for a Soft Credit Check
The payday loan lender will then perform a soft credit check to ensure you’re a good risk to take. This will not affect your credit score.
Once you are approved, the money will be deposited directly into your bank account. That usually can happen either the same day or the next business day.
Usually, the process won’t take more than five minutes.
What May Disqualify You From Getting a Payday Loan
Even if you do meet all of the requirements, you still may not qualify. Each province has its own set of rules and regulations for payday loans.
But there are a few other reasons why you may not qualify for a loan such as:
Not Enough Money
Even though you earn an income, if you don’t earn at least $500 monthly net income, lenders typically won’t lend to you.
You may be subjected to limitations from lenders if you don’t meet their repayment requirements. No lender wants to give money to someone who may not be able to pay them back.
Bad Credit History
A lender can easily find out if you already have an outstanding loan and deny you. They also won’t lend you money if you’ve had a recent bankruptcy or bounced cheques.
Not Enough History Built-Up
Lenders want to know you have a steady source of income. If you’ve had your job for six months or less, they may find you too risky to lend money to.
Also, if your bank account has been opened recently, there’s not enough history for a lender to see if you’re good at paying your bills on time.
What You Need to Know About Payday Loans
In Canada, you can only borrow up to $1,500. Before you take out a loan, make sure that you can pay it back using your next paycheque.
Otherwise, you’ll face more fees and increased interest charges. Keep in mind that payday loans can get expensive because:
- Interest rates are much higher than on regular loans or lines of credit
- High fees
- If your direct debit or cheque doesn’t go through, you’re often subject to paying an additional fees
A payday loan should only be used by those who can pay back the loan quickly.
What Happens If You Don’t Pay Your Loan Back on Time
But it’s not just additional fees from the lender you’re facing if you can’t pay back your loan on time. You may also have to contend with some or all of the following consequences:
- Your financial institution can also charge a fee for the bounced cheque
- The payday lender can call friends and family, to even your employer to find you so they can collect their money
- Your loan could be sold to a collection agency
- Your loan can show up negatively on your credit report
- You could be sued by the lender or collection agency for the debt
- Your property could be seized by the payday lender or collection agency
- Your work wages could be garnished by the payday lender or collection agency
Don’t allow money issues to lead you in the wrong direction. There may be other options available.
Other Ways to Get the Money You Need
If you need money immediately and don’t feel a payday loan is a good option, here are a few other suggestions:
- Borrow from friends or family
- Ask for a payday advance at work
- Use your credit card
- Cash in vacation days
You can also try selling items in your home you no longer use or need.
What to Ask Your Lender
Before you take out a loan, always read everything carefully to ensure you fully understand the agreement. Do not be afraid to ask questions to help clear up any areas you feel confused about.
You should understand your financial obligations including all the fees, charges, and interest you’ll be charged. Find out when the loan is due and what the maximum cost you can be charged for a payday loan.
Then find out what fees will be applied if for any reason you cannot pay back your loan on time. Keep in mind some provinces and territories are not regulated regarding what maximum fees they can charge for non-sufficient funds.
Ask About Copies and Cooling Off Periods
Ask to see if there’s what’s known as a “cooling off” period attached to your loan. This is a period of time where you can cancel your loan for any reason without having to pay any fees. This period often lasts a day or two.
Make sure to get and keep a copy of your loan to refer to should a problem arise.
Apply for Your Loan
What do I need for a payday loan? The right documentation and the ability to pay back the loan in a timely manner.
If that’s you, it’s time to get started. Click here to claim your cash now.