loan is a small, short term loan. The lenders charge their fees
and process the amount in no time. It is given in cash and secured
by post dated check. The check includes principal amount plus
accrued interest. On maturity the borrower can pay back the amount
either in cash or let the check get payment from the bank. A $100
payday loan for 14 days comes up to $115. This could be paid back
on or before due date either in cash or through check. If the
loan is not paid, then it is rolled over for the next 14 days,
after charging some fee. But interest on it accumulates very fast.
Several companies have however restricted the number of roll over
to a maximum of three times and most of them donít allow another
loan till the previous one is settled.
payday loans are just like American payday loans. Since most American
companies didnít lend Canadians, many companies came up for their
cash requirements. This subsequently grew to a billion dollar
industry and now there are about 1300 outlets of payday loans
across Canada. The process to borrow payday loan is also easy.
For Payday Loans Canada only residents of Canada with
an active bank account (most companies require five to seven transactions
from that account), a working phone, and a pay stub are needed.
The processing time varies from half an hour to twenty four hours.
When the processing of a payday loan is compared with that of
banks, it proves much faster. No credit check, simple procedure
and fast result make payday loan an attractive option for fast
cash. The borrower shows his bank statement and pay stub, offer
a post dated check and gets the cash. The loan approved is proportional
to the income of the borrower.
Loans Canada is so popular with the borrowers
that they are more aware of its administrative fee and interest
than any other financial institutionsí. Itís also popular because
it helps people with bad credit record and the bankís inefficiency
to provide small, short term loans. These reasons have brought
this business to such a colossal proportion.
small, short term cash is required from young and hard working
people, who have full time job but their household income does
not exceed $30000 per annum whereas average household income of
Canada is about $54000 p.a. In this income group, small short
term loan requirement is natural and payday loan solves this problem.
payday loan is not without criticism. It is said that payday loan
charges a very high interest rate and targets young and the poor
who are not in a position to calculate TMV or Time Value for Money.
Payday lenders are also alleged as loan sharks. [Loan sharks are
in fact those individuals or organizations who offer illegal,
unsecured loan at high rate of interest. Payday
Loans Canada Companies are charged for levying criminal rate
of interest and are accused of breaking the law because almost
all of them basically operate in the same manner. It has also
been alleged that these companies typically inform borrowers about
interest fee only, whereas they add handling fee, administrative
fee, finderís fee, brokerage fee etc., which takes the interest
to a criminal range and flouts the federal law of not collecting
more than 60% p.a. Payday loan is, in fact, paid back several
times as fees. It is an endless trap.
lenders have their own arguments and they refute all the charges
leveled against them. They say that payday loan is a small, short
term loan and to convert it on Annual Percentage Rate or APR is
meaningless. It is just like calculating the annual intake of
a person or calculating rent of a hotel room on an annual basis.
Payday Lenderís Association has been requesting federal government
of Canada to increase the rate of interest for small, short term
loan because the existing limit of interest could in no way cover
Loans Canada is for short term needs and
are not intended or recommended for longer periods. It is also
suggested that this loan should be borrowed only up to the manageable
extent so that it could be fully paid back at the time of maturity.
If loan for a longer duration is required then it is suggested
to tap other sources like borrowings from employers, friends and
family members or bank overdraft, line of credit, cash advance
on credit card, consolidating debt at bank etc. It is also advised
that persistent borrowers should take credit counseling.
loan association has also tried to make their functioning efficient
and transparent. It is in favor of clear and full disclosure of
charges, collection of dues in a fully professional way, educating
the use of loan and availability of debt counseling services.
They have also provisions of penalties for those members of the
association who violate its code. But this code has come a little
bit late and released only after an organization of low income
group people demanded for immediate government action to bridle
it is indicted that payday loan charges criminal rate of interest
and violates the federal law of Canada but when it is compared
with other institutions, the charges levied by them comes far
short of others. A bounced check of $100 collects $48 fee, which
is 1251%, a $100 credit card balance charges $26 as late fee,
which comes to 678% and a $100 utility bill, in case of non-payment
charges $50 as late or reconnection fee, which comes to 1304%.
Payday loan of $100 collects only $15 fee, which is only 391%.
To take loan at the rate of 391% to save the interest of 1304%
is much more economic and an intelligent decision. This loan should
be borrowed only on such occasions and paid back without allowing
it to roll-over.
loan does what the banks do not. Some people suggest that this
loan should be avoided completely. But it could be availed after
an astute decision.
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