Cash advance loans can give you access to quick cash when you have temporary financial setbacks or unexpected expenses. These types of loans, also known as payday loans, are short term solutions that you repay in full by your next payday.
⚠️ Warning: be cautious with short-term loans
If you're experiencing financial hardship and would like to speak to someone for free financial counselling, you can call Credit Counselling Canada on 1800 007 007. It's open from 8:00am to 5pm, Monday to Friday. When comparing short-term loans, ensure you take into consideration all fees, charges and interest to understand how much your loan might cost in total.
Alternatives to short-term loans
Consider these alternatives before applying for a payday loan:
Use online Government resources. The Financial Consumer Agency of Canada website demonstrates how small amount loans work – and suggests alternative options that may help you.
Payment plans. Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan or receive an extension on your due date if you’re behind on payments.
Contact your creditors. Speak with creditors about extending the due date of your payment, or working out a new payment plan that works for both of you.
Seek personal loans elsewhere. Consider a small personal loan from a bank or a credit union. You may qualify for a loan with much lower interest rates than those offered by payday loan companies.
Pay with credit card. Consider paying with your credit card to cover your emergency bills or payments. This is not a long term solution, as you’ll need to pay off the balance as soon as possible, but it’s an alternative to a short term loan with high – and immediate – interest rates.
Check the websites of any lenders you’re interested in to confirm they operate in your province or territory of residence.
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How does a cash advance loan work?
A cash advance loan is another way of describing a payday loan. These types of loans are known for their high interest rates and fast payback speeds. Additionally, you might have to pay extra in the form of fees and charges, so be sure to compare your options before taking out a loan.
The money you receive from a cash advance loan can be used for just about anything, as long as it’s for legitimate purposes. Whether you need to pay bills or cover your everyday expenses until your next paycheque, you can use your loan to cover it.
Borrowing a cash advance loan is relatively simple. Most lenders will approve even those with bad credit for a cash advance loan, since they focus more on your ability to repay the loan as opposed to your credit history. While a steady income is necessary for most lenders, it’s possible to find a cash advance loan when you have other forms of income, like welfare payments, self-employment income or investment income.
If you’re approved for the loan, you’ll be able to receive your money as cash if you apply in-store or directly into your bank account if you apply online. If you get approved online, you’ll usually receive your loan by the next business day, while applying in-store can have you leaving with the funds shortly after.
Why features should I consider?
In order to find the best cash advance loan for you, you should keep the following features in mind:
The multiple options. You can approach a direct lender or a loan-connection service to find the best loan for you.
The ease of applying online. You don’t need to visit a physical location and fill out and sign forms. The application can usually be completed in a few minutes online, and once you’re approved, you can receive your loan in your bank account by the next business day. If you want cash today, it’s best to apply in person at a lender location.
Competitive loan fees may be available. Not all cash advance loan providers charge the same fees, so compare different lenders and pay attention to any fee differences before you take out a loan.
Bad credit is OK. If you have a regular income, lenders might consider you for a cash advance loan no matter what your credit history looks like.
John found out he had to travel across the country to attend a funeral, but he didn’t have enough money to cover the flight. His paycheque was still three weeks away and he had just paid all of his bills for the month. The funeral was in three days, so applying for a traditional personal loan was not an option and his credit card was maxed out. He searched online and compared some of his cash advance loan options.
He needed $600 for the return flight, which he wanted to repay over the course of his next two paydays. He found a lender who offered terms to suit his needs and applied for a cash advance loan. The money was in his chequing account by the following business day. He made his payments on time, incurred no extra fees and managed to pay off the cash advance in two months as planned.
What are the pros and cons of taking out a cash advance loan?
You can use the money for any purpose. You’re free to use the money you receive through a cash advance loan for just about any worthwhile and legitimate purpose, like buying groceries, paying bills or repairing a car.
It’s a quick and easy process. Online cash advance loans require you to submit a simple application that you can complete in less than 10 minutes, where you usually receive your funds in your bank account by the next business day. Applying in person at a store is just as quick, however you can usually leave cash in hand within the hour.
There’s no collateral required. You don’t have to provide any kind of collateral or security to apply for a cash advance loan.
You’ll be charged high fees. Cash advance loans have considerably higher interest rates when compared to conventional loans. You may also have to pay additional fees if you don’t repay your loan on time.
The loan will have to be repaid quickly. You won’t have much time to repay your cash advance loan, which can put a bit of a strain on your budget. Make sure you work out whether you can afford to repay the loan before you sign the contract and accept the loan.
Things to avoid when you take out a cash advance loan
Before you apply for a loan, ensure that you won’t have any problems making your repayments on time. If you think you might have trouble, don’t borrow – and consider your other financing options. Late or missed repayments come with increased fees, charges and interest rates, on top of negatively impacting your credit score. Always work the repayment schedule into your budget and you won’t have to worry about paying extra money.
Are payday loans available in my province or territory?
Payday loans are available in all provinces and territories across Canada. You should be aware that payday loans are regulated by individual provinces, which means costs and fees can vary. Ensure that any lender you choose abides by the laws of the place you live.
At the time of writing in January 2019, the Yukon, Nunavut and the Northwest Territories do not have legislation regulating payday loans at the territorial level. Payday loans are regulated in the territories at the federal level only.
Generally yes, but make sure the lender you apply with follows all applicable laws that govern the cash advance/payday loan industry in your province or territory.
Providers of online cash advance loans tend to use the latest in technology to keep the information you provide secure and confidential.
The maximum you can borrow will depend on where you live and your ability to repay the loan.
You will need to be 18 years of age or the age of majority in your province or territory, as well as a Canadian citizen or permanent resident. You will likely need some sort of income, as well as a valid bank account.
Most lenders require that you repay the borrowed money along with all applicable fees by your next payday, however this will depend on the loan terms stated in your contract.
Elizabeth Barry is Finder's global fintech editor. She has written about finance for over five years and has been featured in a range of publications and media including Seven News, the ABC, Mamamia, Dynamic Business and Financy. Elizabeth has a Bachelor of Communications and a Master of Creative Writing from the University of Technology Sydney. In 2017, she received the Highly Commended award for Best New Journalist at The Lizzies. Elizabeth has found writing about innovations in financial services to be her passion (which has surprised no one more than herself).
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