Although still new, pay advance apps are cornering the market on more affordable payday loan alternatives. You can get the money you’ve already made when you need it, and often at a much lower cost than payday loans. But most apps have strict eligibility criteria you’ll have to meet first.
⚠️ 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.
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Provided you’re currently employed and work steady hours, a pay advance app — also known as a cash advance app or paycheque advance app — may be able to advance you up to 50% of your paycheque. The time it takes varies by provider, though most can deposit your funds into your bank account in less than three business days. Most pay advance apps work off tipping or a small monthly membership fee, so you can stay worry-free from interest or other costs.
Branch and PayActiv are 2 pay advance apps that are currently available in Canada.
How do pay advance apps work?
In general, pay advance apps work by downloading the app to your smartphone and following the directions to create an account. You typically need to enter your contact details, bank account numbers and information about your employment and when you’re paid.
From there, it may take a few days or even a couple months for the app to confirm your identity and direct deposits. It needs to make sure you have an established history of employment and pay. Once it does, you can navigate to its pay advance section and select and how much you’d like to borrow and submit your request.
How much can I borrow?
It varies by provider, you can typically borrow a percentage of the money you’ve already earned. Some have a small maximum limit of just $75, while others may advance you up to $500 per pay period.
The total depends on the app and your hourly wage. Many are constantly doing the math for you and show you how much you have available at any given time so you can make an informed decision.
How much does it cost to borrow?
It depends on the app. Some charge a monthly membership fee that can range from $1 to $10, while others ask you to tip — though it’s usually optional. Some only charge a small flat fee like an ATM fee. And none of the apps listed below charge interest — a far cry from the costs of payday lenders.
How do repayments work?
Usually, the pay advance app automatically deducts your funds from your bank account on the due date — which is typically your pay day. So the money essentially comes off your paycheque once you actually receive it. If you don’t have enough in your account, many will hold off on withdrawing your payment to prevent you from entering overdraft.
However, you won’t be able to borrow again until you repay your current advance. And some apps may even ban you if this happens too frequently.
Employer-based pay advance apps
Some companies in the US, like Walmart and Comcast, have started partnering with pay advance apps to offer both wage advances and installment loans specifically to employees. These work similarly to pay advance apps for everyone, but instead it’s your employer that advances you money and deducts repayments from your future paycheques.
Pros and cons of pay advance apps
Pros
Limited costs. Pay advance apps usually charge zero interest, so you’re only on the hook for a small monthly membership fee or optional tip — if that.
Quick turnaround. You may be able to get your money the same day depending on the app you use.
Budgeting features. Almost every pay advance app tracks your income and spending to give you a heads up if you might overdraw your account.
Cons
Must be employed. Pay advance apps give you an advance on your paycheque, so you need to be employed to qualify.
Limited loan amount. The amount you can borrow is typically based on the money you’ve already earned — usually no more than $500 per pay period.
May pay a membership fee. Some apps charge a monthly membership fee — whether or not you take out an advance.
Am I eligible to use a pay advance app?
Eligibility criteria vary between providers, but there are a few basic requirements you need to meet:
Be gainfully employed
Work regular hours
Receive a consistent paycheque
Have an operational chequing account
Receive direct deposits
Some apps may also require you to work for a specific employer or make a minimum amount of money each month to qualify.
Will pay advance apps affect my credit?
In general, no. Most pay advance apps don’t check your credit history when you request an advance, nor will they report your on-time or missed payments to the major credit bureaus.
Alternatives to pay advance apps
Pay advance apps are only one option when you’re looking for cash fast. If you need to borrow more than these apps offer, you might want to look into these alternatives:
Payday loans. Depending on what state you live in, you may be able to get a payday loan between $100 and $500. However, these usually come with APRs in the triple digits and loan terms of just a month. Compare lenders below.
Local programs and resources. Many local government agencies, nonprofits and charities offer free financial services and help with things like food or utilities for those in need.
Compare payday loans
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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Bottom line
If you need a few extra bucks or so to hold you over until your next paycheque, consider using a pay advance app. They usually don’t charge interest, so you’ll only be on the hook for a minimal membership fee or optional tip — if that. But you’ll need to be employed to qualify, and you’re limited to borrowing a percentage of the money you already earned.
Don’t have a regular source of income or need to borrow more? You might want to look into your payday loan options instead.
Frequently asked questions
Pay advance apps require your bank account information so they can verify your incoming direct deposits, confirm your identity and have a place to send your advance.
In general, yes — though no app can ensure your information stays 100% safe. These pay advance apps do their part by encrypting any data you enter to protect it from hackers. Plus, they don’t store your bank account info on the app itself, which reduces the likelihood of your personal information being stolen.
In order to ensure you have money left over to live on — and that you can repay what you borrow — most pay advance apps set an upper limit on the amount you can borrow. This is generally a percentage of what you’ve earned or a set limit per pay period.
Kellye Guinan is a writer and editor with Finder and has years of experience in academic writing and research. Between her passion for books and her love of language, she works on creating stories and volunteering her time on worthy causes. She lives in the woods and likes to find new bug friends in between reading just a little too much nonfiction.
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