What Do You Need For A Payday Loan In Canada?

By: Kristina0 comments

Payday loans can be lifesavers for those on the payroll. However, that’s not to say that self-employed people can’t have a piece of the cake- They can. It’s even possible for the disabled who receive benefits from the Canadian Pension Plan to apply for and secure payday loans.

So what do I need to get a payday loan?

Before we get started, here is a little something on payday loans.

Payday loans are short-term loans with relatively higher interest rates. They’re given out to clients who promise to repay the amount using their next paycheck. Hence, the name “payday” loans. At times, payday loans are also referred to as cash advances.

Payday loans indeed carry an element of risk and that is why we’d always advise you to apply for one only when you’re facing a serious financial crisis. Because of the short repayment period, it’s very easy for a person to get caught unaware and end up having to pay late payment penalties. The high-interest rates associated with payday loans can easily plunge you into a vicious cycle of debt (Never use payday loans to repay other loans).

Remember that late repayment fees are calculated from the loan amount. They can be somewhere from $10 to 30$ for every $100 borrowed.

It’s also worth noting that the majority of payday loans are “no credit check”- This means that even people with bad credit scores can apply for payday loans.

What Do You Need For A Payday Loan In Canada? Basic Requirements

The Government’s Financial Consumer Agency has clearly stated the minimum requirements needed to successfully apply for a payday loan:

  • You need to be at least 18 years old.
  • You need to have an active bank account.
  • You need to show up with proof of income.
  • You need to show proof of identification using ID, passport, or driver’s license.

Payday loan processing is faster compared to other loans. For some, it might take 2-3 days if the lender feels he/she has to go through your income flow. However, this likely going to be the case with traditional lenders like banks and other financial institutions. The process is significantly faster with online payday lenders- It can take as little as 15 minutes.

What DO You Need To Get A Payday Loan? Necessary Documentation

Payday loans are meant to be fast and easy to qualify for and, therefore, there isn’t much that is required from you when applying for one. The most important documents are to show identity and proof that you make some income.

Below are some of the necessary documents needed when applying for a payday loan:

  • A document that proves your Canadian citizenship and identity like an ID, driver’s license, or passport.
  • Documents that prove your income: Your bank statements, business’ bank statement (if you’re self-employed), and proof that you’re receiving funds from a Canadian Pension Plan (if you’ve secured any). Some lenders ask for a summary of all your transactions (plus expenses) to gauge the ability of lenders at repaying loans.
  • Some lenders might ask you to provide them with proof that you’re employed by a certain company.

How Are Payday Loan Rates Calculated?

Many people just know that payday loan rates are usually higher than other loan types. However, very few know exactly how payday loan rates and fees are calculated. It’s important to know this little bit of information since they’re some unscrupulous lenders that might do you dirty.

Here is how you calculate the annual percentage interest rate for payday loans:

  • Divide the interest to be paid by the amount borrowed.
  • Next, multiply the result by 365.
  • Thereafter, divide the result from step 2 by the repayment period and then multiply by 100.

An example: Let’s say you took a payday loan of $400 to be paid with a “finance charge” of $20 for every $100 borrowed, which would be a total of $80 for $400. You’re supposed to repay the loan (plus interest) in the next 14 days.

To calculate the interest rate take:

  • Take 80 ÷ 400 = 0.2
  • Next, take 0.2 ✕ 365 = 73
  • Then, take 73 ÷ 14 = 5.214 ✕ 100 = 521.4%

We hope you now get the picture as to what is meant when they say that payday loans have very high-interest rates.

Process Of Applying For A Payday Loan

Applying and securing a loan should indeed be easy as long as you’re Canadian with a reliable source of income. However, this isn’t the case. The majority of people have a hard time right at the start of the process of applying for a payday loan because they can’t meet the right lender.

Finding the right lender can be difficult for self-employed people or those on pension plans compared to the majority who are employed with stable incomes. It’s for this reason that Loans Geeks exists- To allow you to scan through many different payday lenders all at once without leaving your house. Not only is it convenient, but it also saves you a lot of time that would have been wasted hopping from one office to another. It can’t get any easier than Loan Geeks.

After you’ve identified the right lender that is willing to give you a chance, go ahead and present the required documents to them.

Next, ask several questions on:

  • Costs, fees, and interest rate associated with the loan
  • The set repayment period

After you’ve agreed on those terms, they’ll go ahead and ask you to do one of the following things:

  • To give them access to your bank account for automatic withdrawals if you happen to delay with repayment.
  • To sign a post-dated check that they’ll hold onto until you repay the loan. They’ll cash the check as payment should you fail to repay the payday loan on time.

Once you’ve agreed to one of those, go ahead and ask if they’ll give you a copy of the loan agreement. You should only sign if it’s within their policy to give out copies of loan agreements. Don’t sign if they don’t.

Payday loans are made in such a way that they’re fast to process and issue out. In addition to that, it’s only a handful of documents that are needed for a payday loan application.

Frequently Asked Questions

What do I need to apply for a payday loan?

Just a handful of documents:

  • Proof of identification like an ID or passport. You also need to be at least 18 years old
  • Proof of steady income like bank statements
  • An active bank account
  • A mobile number, email, and home address

Do you need good credit for a payday loan?

Good credit scores are always welcomed, but it’s not a must for payday loans. After all, they’re also referred to as “no credit check loans”.

Can you get a payday loan without a bank account?

Yes, but very few lenders will agree to that. You need to have an active bank account to apply for and secure a payday loan. It’s even more important with online payday loans.

Can I get a payday loan with only a debit card?

Yes, however, it will be very difficult to pin down a lender because most of them operate on direct deposits with bank accounts.

Do payday lenders call your employer?

Some payday lenders will call you via your office line. However, they’re not allowed to talk to your employer. They’ll only ask to speak to you without having to disclose their identity or your deal with them.

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