The Canadian Payday Loan Association says nearly two million Canadians use payday loans yearly. When you face a financial emergency, like a home expense or car problem, you don’t have many options available to help. But fast loans in Canada are excellent for getting the funds you need. There’s a lot of information about quick loans, good and bad, which can feel overwhelming to sift through.
Luckily, we’ll break down the pros and cons of using fast loans so you can decide if you want to apply. Just keep reading.
What Are Fast Loans?
Fast or payday loans are short-term loans designed to help with urgent needs. The term payday loan comes from the idea that you receive enough money to hold you over until your next paycheck and repay the debt on your next payday.
Previously, you would write a check to the lender for the principal loan amount plus interest, and the lender would cash the check on your payday.
Today, the process is much easier. All you need to do is fill out a short application online, which the lender will quickly review and accept. Next, you will supply your bank details so the lender can deposit the money into your account. Then, when the repayment is due, the lender can easily withdraw the funds from your account.
Payday loan amounts range from $100 to $2,000. However, the most common amount people borrow is about $500 to $750.
Payday loans typically only have one repayment. Yet, some lenders offer fast loans with longer repayment periods of several weeks or months. Any loan with a repayment period longer than a year is more similar to a traditional loan than a fast loan.
Benefits of Fast Loans
There are many benefits of using fast loans, making them invaluable to customers facing an emergency.
Payday loans are quick and easy. As mentioned, you can complete an online application within minutes and receive your funds within 24 hours. For many lenders, you may even receive the funds on the same day. To qualify for the loan, you need the following:
- Government ID
- Active bank account
- Stable employment with a regular source of income
You must also be at least 18 years of age to apply.
Fortunately, there is no credit check. This is incredibly useful for those who don’t have a good credit score or bad credit history. Additionally, some lenders have fast loans specifically for those with bad credit.
Compared to traditional loans that ask borrowers to supply extra paperwork and pull a credit report, the requirements to get a fast loan are much less stringent. This is how you’re able to receive the funds so quickly.
Plus, fast loans are unsecured loans. So if you fail to make a payment, your home, car, and other assets are not directly at risk. But be aware that if you miss payments, the lender can send your debt to debt collection or take you to court. Thus, you want to avoid these outcomes, as they will negatively impact your creditworthiness.
Cons of Fast Loans
Although the benefits sound convincing, there are some disadvantages you need to consider before applying for a fast loan.
First, because they are quick, easy, and have lower qualification requirements, payday loans are known for having high fees and annual percentage rates (APR). The average APR is between 300% and 400%, whereas the average credit card has an APR of 20%.
But consider this; since you are only borrowing a small amount, you will likely pay less interest than taking out a traditional loan. For example, if you rack up a $10,000 credit card bill, you will pay more in interest than from a payday loan of $500.
Although some payday loans can be repaid over a few weeks or months, many require repayment in a lump sum, which can be challenging for borrowers. If your loan is due in a single payment, you need to calculate your monthly expenses and budget for the repayment ahead of time.
Missing the payment will allow interest to incur further, and you’ll face penalties. As a result, you will pay much more back to the lender than you borrowed in the first place. This could cause you to get stuck in a cycle of debt. If you have difficulty budgeting, you may need to consider other loan options.
Avoiding Payday Scams
Unfortunately, the payday loan market is abundant with scammers. Of course, there are many reliable lenders like us at Kingcash, but you need to look for scams when applying for loans online.
Since the lender will have direct access to your bank account, you don’t want that information to fall into the wrong hands. Scammers could quickly drain your bank account and cause financial ruin with it.
Here are some tips to help you stay safe when working with online lenders.
Never provide your personal information if the lender asks for your login credentials over the phone.
Always ensure the login page is secure. When you visit the lender’s website, you can see whether it’s safe by looking at the web address. Websites beginning with “HTTP” are not secure, but websites starting with “HTTPS” are secure.
Finally, you should never pay a fee to the lender before applying. This is a red flag that the company is a scam.
Get Fast Loans in Canada
Although payday loans have long had a poor reputation, they remain an essential and valuable financial tool for those who need urgent funds. When considering fast loans in Canada, always weigh the pros and cons of your unique situation before borrowing money.
If you’re ready to get a loan, apply online now at Kingcash. It takes less than five minutes!