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Pay Day Loans
Payday loans are monies given by individuals or organizations in return the borrower pays back with interest and other charges associated with the loan. Loans are in so many forms such as payday loans, credit cards, student loans etc.
Before a loan transaction is agreed on by the lender and borrower, there is an agreement form which is signed by the borrower.
Until that is done no money is exchanged. This agreement is known as a loan agreement contract.
Do You Need A Collateral Before You Get A Payday Loan?
Sometimes collateral is requested by the lender as part of the agreement of the loan and it is stated in the contract.
With payday loans however no collateral is requested by the lender since the loan doesn’t last long and the amount given is small as compared to personal loans.
In the contracts for loans, the interest on the loan is stated as well as all other expenses regarding the loan.
Loans are for a specific time frame, spanning from 2 weeks to 5 years. Payday loans are short-term loans so the period for repayment is very short. Usually lasting between 2 to 4 weeks.
Mostly, the length of the loan is agreed by both parties with regards to borrowers income and other financial responsibilities.
During this period when the loan is being serviced, it is the lender who bears all the risk associated with the loan in case the borrower goes back on the agreement. In this instance payday loans is where our focus will be with regards to this write-up.
What Is A Payday Loan?
There are different names associated with payday loans. Payday loans are sometimes referred to as cash advance loans, salary loans, payday advance, small dollar loans, short-term loans or payroll loans.
Whichever way you prefer to call it, they all refer to the same thing and are all short-term loans. No collateral is needed to get payday loans. A payday loan is an exceptionally high-interest rate loan which has a short span and is repaid when the borrower is paid his or her salary.
Rules Regarding Payday Loans.
The rules regarding payday loans differ from country to country as well as federal systems. Even rules guiding the payday loans also differs in different states. There are several lenders online who give payday loans. These lenders are all very ready to give borrowers payday loans as far as you have an income , you are of age and have a valid ID. It doesn’t matter if a borrower is late on payments of bills or has a bad credit history. The payday loans lender is always ready to give out loans.
For payday loans, no credit check is needed. Even people who are getting regular assistance from the government are considered by lenders who give payday loans.
The target for payday lenders is a section of borrowers who are not financially secure so cannot get a loan from the banks or financial institutions.
Most lenders of payday loans are like predators who prey on borrowers who are desperate for fast money.
The payday loans help borrowers sort out an emergency most of the time but in the end, it is the lenders who benefit more.
Wondering How Payday Loans Work?
How payday loans work is that the lender will make sure you do earn the amount you claim to earn, and then make checks on your account information as well.
Borrowers of payday loans are made to give the lenders electronically signed permission to withdraw loan repayments from the borrowers account.
When all of this ‘checks’ with the lender, your money is then credited to your account.
Because payday loans are short-term loans, the loan is due sometimes within two weeks or a month as agreed by both parties.
For payday loans, there are individuals who act as brokers on borrowers behalf, and the job of the broker is to find you the best deal.
This deal can be convenient sometimes but also very open to fraudsters.
To avoid any fraudster taking advantage of you, get payday loans from direct lenders to save yourself from all the stress of being duped.
Lenders who offer payday loans will most likely loan you money up to sixty percent of your income.
The catch is that a borrower must pay back the loan within two weeks which is the next payday date or within a month, whichever applies to the borrower.
Things Not To Forget
Not forgetting the amount repaid includes all charges, interest and administration fees. At the end of the period, the postdated cheque given to the lender by the borrow is taken to the account holders of the borrower and the transfer of the money is made.
In Canada some few years ago the government waged a ‘war’ on payday lenders and also how much they can give out as loans. Due to this business was not as profitable as before so most payday lenders decided to operate online instead of having a physical location where they had to pay for workers and logistics.
This trend has become the norm for most lenders who give payday loans. Going online now, you will find several payday lenders waiting to give payday loans.
Borrowers Need To Understand The Cost Associated With Payday Loans
No loan comes for free. This applies to payday loans too. However, with payday loans, the interest rates are excessively high even higher than that of credit cards.
Interest rates are different when it comes to different lenders. Each lender has a way of calculating their interest rates on payday loans.
PayDay Loans Rates
The loan rates range between fifteen to thirty-five percent of the full amount borrowed.
That’s quite an amount added to the amount borrowed for only two weeks or even a month.
So in reality borrowing, lets say $200 is not really so because in the end what you end up paying is way above that $200 borrowed. Lenders are smart about this because they are aware borrowers are in desperate need of money so will overlook the high interest rates on payday loans.
Borrowers at that particular time are only interested in getting the money needed to sort out the emergency or financial problems out. It is when the money has been used for what it was intended for and the repayment is taken from the borrowers account that the reality sets in.
Because most at times when the money is taken from the account, what is left will be much smaller than may be expected.
Cost Affiliated With Payday Loans
Some borrowers of payday loans are able to manage what is left throughout the month till another payday. Others however are not able to manage so end up going back to the lender for more payday loans. Sometimes this becomes a cycle.
If care is not taken a borrower will be entangled in a cycle that will end up being a habit. This can plunge a borrower into a cycle that will make his or her financial situation even worse than it was in the beginning.
When this happens the most likely thing to happen is that the borrower will default in payments.
Bringing with it bank charges and in the long run, being taken to court by the lender and this will adversely affect your creditworthiness.
Installment Loans Verses Payday Loans
Looking for a more realistic loan, then installment loans are just right. The loans are much cheaper, more money and the repayment amounts much lower as compared to payday loans.
The most important part of an installment loan is, you don’t have to pay back the loan in bulk like payday loans. Instead, you pay them in installments just like the name suggests.
The amounts paid for installment loans are smaller and they are spread for a couple of months. A convenient way to pay back your loans as well as have some extra to use for other obligations.
How Long Do Installment Loans Run?
Installment loans run between 3 to twelve months, paid monthly after every payday just like payday loans.
The difference however between the two is that with payday loans you pay everything at once whiles with installment loans, an amount is spread out, makin it very economical.
With this kind of payments (installment loans), a borrower is able to pay off the loan at the end of the specified period. Borrowers are able to afford this type of repayment schedule more so the default rate is much lower as compared to payday loans.
Paying off loans earlier than stated time because a borrower got help with his or her finances does not attract any penalty. Payday loans always look like the end of a ‘nightmare’ for borrowers especially when they get the money they ask for in the shortest possible time.
This relief will be short-lived when a borrower is faced with paying back the loan in two weeks or a months’ time with that high-interest rate calculated on the loan. Installment loans help pull a borrower away from falling in a cycle of borrowing as this is what normally happens with borrowers with payday loans.
What Do I Risk If I Default In Paying Back PayDay Loans
Payday loans are due at the end of every two weeks or end of month agreed on. Lenders don’t delay when its due for repayment. Process for the withdrawal of the money is almost immediate when your salary hits the account.
If the withdrawal does not go through, what lenders normally do is to break the money into small amounts and try and withdraw. When all of these efforts fail that is when lenders begin to see ‘red’ and will try to get in touch with you through the personal information provided.
Note that every time the attempt fails, your bankers charge a fee. Its success also means your bank account will be empty and other obligations through your account will fail.
Lawsuits Against Defaulters
Failure to retrieve the money through these means, lenders will write to you through their lawyers or will give your name and details to a debt collection agency.
A lawsuit can be filed against you and if it is successful, your assets can be confiscated and auctioned for the lender to get his or her money back.
As a borrower what you can do is to negotiate with the lenders to pay the amount in installments.
If that negotiation also fails your last resort is to file for bankruptcy especially if you are burdened with so much debt.
Borrowers are protected by the law in all of this. Lenders will find ways and means to locate you but can’t go about revealing your situation regarding your debt to anyone. Neither can they reveal who they are to send tongues wagging.
Break The Payday Loan Cycle With A Personal Loan
Payday loans have unfortunately become the go-to loan relief for most borrowers because of the prevailing economic crisis. Cash advances or payday loans are helping individuals or families who are in some financial hardship.
Proofing your income by showing your pay slip and having an ID that shows your age is the needed requirement for payday loans. Typically with bank loans, a credit search will be conducted on the borrower to be sure he or she is creditworthy. Whereas with payday loans none of that is required or long application forms.
Approval for the payday loans is also within minutes. So a borrower can walk out with the amount within some few minutes. Personal loans are another type of loan that will help borrowers who have fallen into the cycle of borrowing payday loans to exit.
The interest rates on personal loans are way lower than that of payday loans and have longer tenures.
How To Get Out Of A Payday Loan.
A borrower who needs to get out of the payday loans cycle can take a personal loan and use it to offset the payday loans. Because of the stretched period is given for personal loans a borrower will then have more time to pay and at a lower rate.
It is the wish of most people not to owe or borrow but as human, as we are this is unpreventable. So borrowers shouldn’t be shy about this and seek help when needed. Paying off a person is more convenient and a borrower is more likely to complete payment due to the length of time given and the interest rate on it.
Taking payday loans to take you out of a financial situation won’t be the smartest decision especially when you are qualified for a personal loan.
Advantages of Payday Loans
Nowadays a common loan that most people are relying on is payday loans.
1. Not having a credit history or even a bad credit holder still qualifies for payday loans. Lenders who give payday loans do not do any checks on borrowers with regards to their credit rating. Borrowers with bad credit history, therefore, have a loan that they can rely on.
2. You can save money with payday loans, how? The fast processing and approval of payday loans make it easy for people to pay their bills and other financial obligations such as credit card fees, bounced cheques etc. that would have accumulated more debt if there was a delay.
3. A borrower can easily protect his or her credit rating by taking payday loans and paying at the right time agreed.
4. As a young and upcoming borrower one thing that is a priority is being independent financially and payday loans help with that. Not having to go to your parents or relatives for financial help can really be a relief to a young adult starting his or her life.
5. Being in a financial crisis can be very frustrating. Fortunately, payday loans are so fast it comes through for borrowers who go for it. Within a couple of minutes, a payday loan can be made available to the borrower.
6. Payday loans a fast option when it comes to loan acquisition. Provide an option.
Disadvantages Of Payday Loans
1. A current account as well or a credit card is a requirement for payday loans. A borrower needs an account the money given will be transferred to.
2. Are you gainfully employed or work part-time? You qualify for payday loans.
3. Don’t go for payday loans if you need a loan that will be stretched over a period of time. Payday loans are short-term loans and repayment taken in bulk.
4. Because payday loans are given by mostly online lenders, a lot of fraudulent people have taken advantage of the situation and defrauding people. Borrowers must make sure the lender they choose for payday loans is genuine. Sometimes referrals from friends and family help.
5. Fees and interest rates payday loans are on the high side as compared to other loans such as installment or personal loans. Defaulting on a payday loan, a borrower can end up paying a double of the loan owned.
6. Lenders don’t give huge amounts for payday loans. Highest amount will be between $1000 to $1500. So if you need a bigger amount, payday loans are not the kind of loans for you.
7. Falling into a cycle of borrowing all the time is very possible with payday loans. Due to the high cost, some borrowers are unable to pay back and end up paying back after borrowing again.
As a worker, you might need a loan to be able to take care of emergencies such as a faulty car, medical emergency or even a marriage ceremony.
Payday loans help you to meet these emergencies without all the stress attached to getting a loan.
Bad credit payday loans is a type of payday loan for people in a situation where they are experiencing poor management of their loans. In the past, once you have bad credit, it ’s difficult to get payday loans because most traditional lenders will not be willing to accept people with poor credit.
Taking a payday loan is like taking advance money against your salary so the period between getting paid is covered by a payday loan. Bearing in mind that a payday loan is a short term loan so will be paid back immediately the salary hits the account. Failure to do so is when the issues with payday loans begin.
Before deciding to go for a payday loan, a borrower must always be sure that is what will work for him or her since charges and interest rates on payday loans are very high.
Lenders online offering payday loans is now a very common thing to come across online. They come with very enticing advertisements for payday loans.
Don’t be swayed into taking a payday loan if you haven’t decided on it. Incurring all the high cost of payday loans is not necessary if you don’t have an emergency that needs immediate attention.
In as much as everyone is eligible to get a payday loan, there are three important considerations.
Firstly, you must be of age, that is 18 years. Secondly, you need a valid ID for identification and last but not the least an active bank account.
Filling the forms for payday loans Is one of the easiest things to do. Requirements are short and to the point.
As a borrower, be aware of how a payday loan will affect your credit when you default or when you keep to the agreement.
Unfortunately, most lenders of payday loans don’t report to credit bureaus unless you default in payments. So as a borrower who doesn’t want to have bad credit, it is very important to make sure not to default.
You can also request that the lender reports your payment history to the credit bureau so as to have a good credit report for future use.
Disclaimer: All loans offered through this website are subject to credit and underwriting approval. AfterLoans.ca is a lead referral company, not a lender. AfterLoans only works with financial service providers that adhere to Canadian laws and regulations. Our lenders lend from $500-$5,000. Loans amortization is between 6-36 months. APRs range from 19.99% to 55%. The actual APR charged will depend on the lender’s assessment of your credit profile. For example, on a $1000 loan borrowed for 12 months at 29.9%, the monthly payment will be $97.24; with a total repayment, including interest, of $1166.88 There is also lender’s optional loan protection policy. In the event of a missed payment an insufficient funds fee of around 45$ may be charged (dependent on the lender). If you default on your loan payment plan the lender may terminate the plan and the remaining balance will become payable immediately. Our lenders employ fair debt collection practices, but will pursue the payment of Outstanding debts to the full extent that Canadian law allows.