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LOAN AWAY LOANS (NOT PAYDAY LOANS): APPLICATION REQUIREMENTS
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Payday Loans: What Are They?
Payday loans are short term unsecured loans given to anyone who has proof of a regular income at the end of each month. This type of loan has a repayment period of between one to three months, depending on the financial company that is lending you the money. Usually the money is borrowed till the next pay day of the borrower, hence the name payday loans. Payday loans also fall under what is popularly known here in Canada as bad credit loans. This is because, most people that go for payday loans have poor credit and are not able to get a loan from a regular bank. The amount of money that you can borrow from a payday lender is entirely dependent on the size of your regular paycheck.
Most payday lenders in Canada offer payday loans between $100 $ – $2000. A few of them are a little bit flexible and can offer you a bit more, depending on how much you earn. Processing of payday loans take a minimum of 30 minutes to a maximum of 24 hours. How quickly you get the money may also depend on how fast you provide the necessary information required to process your application. There is no security required to apply for a payday loan. As a matter of fact, the reason why payday loans attract high interest rate is because the loans do not require any security and they are processed faster, compared to applying for other types of loans from banks.
Payday loan lenders are non-traditional lenders and are not like banks. Unlike banks, payday loan lenders quite often specialize in just one financial product. In fact, there are companies that specifically offer payday loans and do not offer any other financial products to their clients.
Traditional banks may be involved in payday lending in the background by providing the money to payday loan lenders but do not offer payday loans directly to the public.
Payday loans Canada Regulations
Most people who apply for payday loans have bad credit. When they need an emergency loan, at least till their next pay day, they have no choice than to go to payday lenders who will mostly ignore their poor credit history. To regulate payday loans Canada and the US have strict laws that protect people against scams and unscrupulous payday loan lenders. Payday loan lending is allowed in Canada under section 347.1 of the Criminal Code of Canada. However, Provinces are expected to provide necessary legislation that will govern the provision of these loans. The legislation is required to regulate the payday loan industry and try to control the amount of interest that is charged for this type of loan. In line with providing regulations for payday loans Ontario has a put a number of restrictions in place to ensure that payday loans in Ontario act ethically and responsibly.
Different Business Models Adopted by Payday Loan Lenders
Lenders of payday loans use innovative business models depending on the amount of capital available at their disposal. They adopt these models as a way of increasing their profit margin and also to control the risk involved in granting payday loans so as to safeguard their investments. They adopt these models as a way of reducing the risk of them losing their money in case a client defaults on the payments. These payday loans business models include:
This type of business model involves the operator providing the entire capital required to offer the payday loans. This model is adopted by companies that have huge amounts of capital at their disposal. The operator provides the money that is borrowed by the customer, they incur the operating costs and also collects all the interest and other charges that are levied on the payday loan. Most of the payday lending institutions that use this model tend to charge lower processing and loan fees compared to other companies using the other models. These companies are the best to obtain your payday loans from. The problem is, there are on a very few lenders of payday loans in the market using this model today.
This model is almost similar to the traditional model described above. Here again the operator incurs all the operating costs. For this type of model, the operator charges customers an insurance premium and a fixed fee for the payday loan. The insurance premium helps to meet the cost of availing the loan and to deal with any risk associated with the borrower defaulting on the loan.
The insurance premium is channeled to an insurance company which insures the loan. Under such arrangement, in case a client defaults on the loan repayment, the insurance company pays the loan. Most of the insurance companies that cover such loans also own the institutions that offer the payday loans.
There is a high rate of default among payday loan borrowers. Because of this most payday loan lenders tend to operate under this model so that they can recover some of their losses from the insurance company.
This model is mostly used by many payday lenders who operate online. People who have sound financial knowledge and have good debt collection skills are starting online payday companies to invest other people’s money.
The brokerage model is an innovative model where the company that offers the payday loan only acts as a link between the borrower and the lender. For this type of model, a third party provides the money that is borrowed by the customer as a payday loan. The lending company (the brokerage) charges a brokerage fees and the other operating costs incurred during the process of facilitation of the loan.
How to Apply for a Payday Loan
Applying for a payday loan is very simple. Most, if not all of the companies that offer payday loans have adopted the use of technology in performing most of their daily transactions. They have websites that allow customers to input their personal information and apply for the payday loan online. Such websites are mostly user friendly websites that allow potential customers to input their information with ease. This makes applying for payday loans online fast and easy.
The companies also offer online customer care services in case an applicant has a problem navigating through the website. Making use of these websites has led to the development of fax less payday loans here in Canada. This means, rather than faxing your details to the bad credit loan company, you can simply use the website to submit your information. This has made online payday loans very popular.
Before making your application for the payday loan, be it in Ontario or in any other province in Canada, you must determine if you qualify for the payday loan. In order to qualify for the payday loan, you must be eighteen years or over. You also must have a legal identification document to make it easier for the company to know who you are. Most companies that offer payday loans accept a driver’s license or a social Insurance Number for identity check.
Apart from identifying yourself, you are also expected to submit some personal information during the process of application. You will be expected to provide both your home address and in some other instances your workplace address. Verification of the address can be done through the use of mail, use of a utility bill or a copy of the lease.
You should also have a working telephone at home and at work. During the process of application, you are expected to have an email address that will help in the communication between you and the company that wishes to lend you money. Most payday loan lending companies will require you to confirm your email address, it is therefore important that you ensure that you input your email address correctly.
You cannot be awarded a loan if you don’t have proof of income. Payday loan lending companies will expect you to identify the day you expect to receive your monthly income. In order to provide proof of income, you will be expected to either have a pay stub (payslip), a T4 Canadian tax form or a bank statement. From any of these documents, the lending institution will be able to monitor when you are paid and know when it is appropriate to collect the monthly repayments from your bank account before you withdraw all your salary from the account.
As hinted above, you also need a personal checking account. The checking account allows the payday lending company to deposit money into your account and collect regular repayments without necessarily you having to visit their physical office for such transactions.
What to Avoid When Taking a Payday Loan
A payday loan can come in handy, especially when you need money urgently. This does not mean you have to borrow the money from the first company that comes along.
There are some factors that should guide you to select the right financial company that will help you to avoid getting in to a debt trap.
First, avoid companies that have been set up as scams on the internet promising that you that you shall benefit from the payday loans at a cheaper price. Most of the companies that use the brokerage model tend to charge higher fees compared to the companies that use the insurance and the conventional model of managing the payday loans. It is therefore important to ensure that you deal with the company that offers the lowest rate of payday loan interest.
There are other companies that are out to obtain your personal information to use maliciously. Before submitting any information online on a website, it is important that you check the URL of the page and establish if it is a secured website. A secured website always has “https://” at the beginning of the URL. Always look out for this.
Additionally, navigate through the website, going through different web pages to establish if the company truly offers payday loans. You can also interact with the online customer care in order to understand what the application process entails.
You should also determine if the company has some hidden charges that will make the loan very expensive. Different payday loan companies use numerous ways to conceal the different charges they charge on the loan. Some payday lenders charge a higher APR (Annual Percentage Rate). Companies that use the insurance model also charge more so as to cover the cost of buying insurance for the loan.
Some payday loan lenders offer the borrower insurance policy to protect their loan in case they fall ill and cannot pay back the money. Do not take an insurance for your payment unless it is absolutely necessary. If you have some savings and you are sure you cannot default on your payment, avoid the insurance.
Payday loans are expensive. Do not take more money as a payday loan or cash advance than you actually need. The more you borrow the more interest you will pay. Taking more money only increases the interest and other charges levied on the loan. It is therefore important that when applying for this type loan you are sure of the amount of money that you need to actually meet your needs.
Pay any repayments on time. Late payments attract charges and NSF fees. Do not over stretch your paycheck until you end up defaulting on other payments that you are expected to make at the end of the month. If necessary, try to reduce your expenses in order to accommodate the new payment that you are supposed to make after your payday loan has been approved.
Should You Take a Payday Loan at All?
No matter how perfect we budget our monthly income and even put some money away for a rainy day, unforeseen emergencies such as a medical emergency do arise and may require urgent financial attention. These emergencies tend to dig deeper into our financial reserve, forcing us to borrow in order to meet the specific needs. Because of the nature of the emergency, going for a conventional loan may not be possible immediately. This is because, conventional loans take a longer time to process. Under these circumstances, a payday loan might be the best option.
Loan Away Loans – The Alternative to Payday Loans
The biggest drawback to payday loans is the risk of falling into a perpetual debt cycle. You need money one month and you go for a payday loan that you have to pay back at the end of the month when you receive your paycheck. This then leaves a gaping hole in your finances at the end of the month and you are forced to borrow again to meet your regular monthly expenses. This cycle can go on and on and month after month and being trapped in this never-ending debt situation.
The best option will be to take a lump sum loan that does not require repayment of the full amount of the loan at the end of the month. By spreading the repayment of the loan over a longer period of up to 36 months, you are able to budget better. This is the type of unsecured loan offered by loanaway.ca
If you need money for an emergency contact loanaway.ca. Even if you have a payday loan already, you can get a loan from loanaway.ca to pay off your payday loan and then spread the payments over a period of 36 months.
WHERE WE OPERATE
We are committed to provide best customer experience possible. Currently we offer personal term loans in Ontario, Alberta and Newfoundland, but do check back with us soon, as we are working on expanding our reach to other provinces and territories.