A payday loan is a short-term loan, where interest rates and added fees are much higher than an average bank loan. They aim to help with any shortfalls in your monthly budget, and you must pay the money back by your next paycheque. If you fail to pay back your loan in time, added fees and interest charges can apply, which will only add to your debt.
Due to these high-interest rates and fees, payday loans can make for an expensive way to borrow funds. Avoid using them for ongoing expenses like groceries, utilities, or rent. Doing so will only increase your debt in the long run.
As per the Government of Canada, you can borrow up to $1,500 when applying for a payday loan. Privately-owned companies are prime lenders around this type of borrowing.
You can apply for a payday loan either online or in their store. Before approval, you will need to fill out a form and provide the following information:
· Proof of regular income.
· A bank account statement.
· Proof of permanent address.
You can also choose between the two following repayment methods for your payday loan:
· Offer the lender a post-dated cheque for the full amount borrowed, including fees.
· Allow the lender to withdraw the loan amount, including fees, from your bank account on a specific day. This is also known as a pre-authorized debit.
Once approved, the payday lender will either give you the money in cash or deposit it in your bank account. Or, funds are placed on a prepaid card, but this could cost extra to use, with added activation fees.
Before you decide on a payday loan, make sure you can pay the lender back within the time needed. Delays in repayment can result in higher fees and interest rates, which can make it easy to dig into a deep hole of debt.