Before you apply for a loan, it’s essential that you ensure the lender is legitimate. We take you through what you need to know in order to avoid a scam.
Legitimate payday loans are provided by lenders who abide by all provincial regulations that are currently in place. Laws and regulations govern features like maximum interest rates, fees and loan terms.
Read our guide to discover how you can make sure you are dealing with a legitimate lender and that the loan you are applying for is the real deal and not a scam.
Cash Money Payday Loan
- Minimum loan amount: $50
- Maximum loan amount: $1,500
- Loan term: 12-14 days. Vary by province
- Turnaround time: Within 2 hours with INTERAC e-Transfer® if approved
- Key requirements: Be 18+ years old, provide proof of recurring income
Compare legitimate short term loans and apply securely
Check the websites of any lenders you’re interested in to confirm they operate in your province of residence.
It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.
Check your options before you borrow:
- For information about other options for managing bills and debts, call 1-866-398-5999 from anywhere in Canada to talk to a credit counsellor from Credit Counselling Canada.
- Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan
- Speak with creditors about extending the due date of your payment.
- Consider a small personal loan from a bank or credit union. You may qualify for a loan with lower interest rates than a payday loan.
- Pay with your credit card with credit available to cover your emergency or payment. This is not a long term solution, rather an alternative to a short term loan with higher rates.
- The Financial Consumer Agency of Canada website shows you how small amount loans work and suggests other options that may help you.
What is a “legit” short term loan?
Short term loans typically need to be repaid by your next payday, whether that’s two weeks from now or one month. A “legit” payday loan is one that’s offered to you legally, meaning the lender abides by all the local regulations. Short term loans can be applied for both online and in person at an outlet, however they all fall under the same regulations.
Short term loan lenders typically have much more relaxed eligibility criteria than traditional lenders like banks and credit unions. Even if you have bad credit, are on a lower income or receive government benefits, you’ll be able to apply for a short term loan. However, this relaxed service comes with much higher interest rates and fees than other types of loans. Payday loans are usually regulated by the government, so ensure that the lender you choose to go with abides by all provincial/territorial regulations, including maximums on annual percentage interest rates (APRs), fees charged and borrowing limits and terms.
Lenders must make a reasonable judgment on an applicant’s ability to repay the loan. The lender should assess factors such as income, living expenses and existing debt in order to determine if the applicant can reasonably repay the loan.
If a lender doesn’t ask you for any of that information or doesn’t attempt to evaluate if you can afford the loan, the lender probably isn’t legitimate.
Three things to look for in a legitimate short term loan
The following should help you find legit short term loans easily:
- Better Business Bureau accreditation. The Better Business Bureau (BBB) is more than a century-old non-profit organization that helps identify trustworthy businesses across Canada, America and Mexico. Different short term lenders across the country have BBB accreditation, and dealing with these businesses provides extra peace of mind.
- Contact details. If you’re looking online for legit short term loans, take some time to find a lender’s contact details. If a lender provides no more than a contact form or an email address, see how responsive they are before you apply. A legitimate short term lender should not shy away from providing a physical address, phone support or live chat.
- Fees and charges. Direct lenders of legit short term loans are upfront about the fees and charges you have to pay during the loan term, and they adhere to all given maximum limits. The loan contract should clearly set out all applicable fees and charges, so be sure to read it thoroughly in order to understand exactly how much you will have to pay.
Benefits of a legit short term loan
If you want to find a legitimate short term loan, keep an eye out for the following features:
- Abiding by provincial regulations. With legit payday loans, you don’t have to worry about lenders charging you more than the maximum limits allowed. Check what the regulations are in your province or territory to see if your lender is operating legally.
- Multiple options. You can get in touch directly with lenders of legitimate short term loans, or you can go through a loan-matching service.
- Bad credit is OK. Many lenders provide legit short term loans to people with bad credit, and while they may run a credit check, they focus more on your ability to pay the loan back instead.
- Quick access to funds. If you apply in person at a store, you can get cash almost as soon as a lender approves your application. When you apply online, the money is transferred into your bank account after you accept the loan contract, usually by the next business day.
- Use money for any reason. Short term lenders don’t place any stipulations on how you can use your loan, as long as you’re using the money for legitimate reasons.
Don has a costly vet billDon has heard the horror stories with payday loans — those scams run by con men online. However, when he finds a stray puppy and takes it to the local vet for shots, he spends more than he thought he would, leaving him strapped for cash for the rest of his monthly expenses.
Don has bad credit from when he was younger and hasn’t paid off his credit cards bills fully in the last few months, so he doesn’t have a large line of credit available. Traditional banks don’t lend small amounts of money, so Don isn’t sure where to turn.
Instead of giving up, Don heads online and looks up how to tell if a lender is legitimate or not. He compares different types of short term loans and finds one that abides by the regulations for his province, and is accredited by the Better Business Bureau.
He takes out a $200 payday loan with this reputable lender and works the costs into his next month’s budget.
Some more considerations before you apply
You’ll have to pay additional fees if you make a late payment or miss one entirely, and your lender may report your late repayments to one of the two credit bureaux – Equifax or TransUnion. Reconsider applying if you think you may have trouble repaying your loan.
Take some time to go through the loan’s terms and conditions, as this document tells you how much you may have to pay in different circumstances, such as rollovers or late payments. Some provinces also don’t allow you to take out more than one within a given period of time. If your lender says you can, they may not be trustworthy.
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, Newfoundland and Labrador, the Yukon, Nunavut and the Northwest Territories do not have legislation regulating payday loans at the provincial or territorial level. Payday loans are regulated in these provinces and territories at the federal level only.