Why payday lenders ask for your bank account details

Most payday lenders, whether online or in-store, will likely require your bank account details. This can be frustrating when you’re trying to find a quick loan to cover an unexpected expense, but you don’t want to share your bank account details. If you’ve been wondering why nearly every payday lender asks for your bank account and transit number, our brief guide below has the answers.

Why do payday lenders need your banking details?

Payday lenders request your bank account details – generally your bank account number and the bank transit number – for a number of reasons.

One reason is to verify that you’re eligible, since most loans require you to have a working bank account to qualify for the loan. A lender will also use this information to deposit your loan funds, and when it’s time to repay your loan, the lender will then automatically withdraw from that same account for your loan repayments.

Just about all online lenders will require you to provide your bank account details otherwise they won’t be able to transfer the funds or receive the borrowed amount back. If you’re applying at a store location, you may be able to give the lender a post-dated cheque. Although, be aware your cheque still contains your account and transit number on it.

Income and employment verification

Another reason why lenders may need access to your banking is to verify your income and employment. Legitimate lenders will never ask for your login credentials, but their loan application might have an online banking verification step.

With online banking verification, you log in through an encrypted portal and authorize your bank to send the payday loan lender electronic copies of your statements. Examples of portals you may encounter include Flinks and Inverite.

If the lender does not have online banking verification, you may have to upload your bank statements yourself into your account with the lender or email them to the service team.

Never give out your bank account username and password to a loan company. If a lender is asking for this, it’s most likely a scam.

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Is it safe to give out banking details?

Yes, as long as you’re applying with a reputable lender. Reputable payday lenders should have a secure, encrypted page for you to submit your bank account numbers along with your other personal information. They will also not share your information with third parties.

However, this doesn’t mean there aren’t scams out there. Here are some quick tips to spot a bad lender:

• The company requests your login details over the phone or through email.
• The login page or application page is unsecure, and your browser shows a warning symbol.
• The company claims you need to pay a fee before applying.

What other details do payday lenders usually ask for?

Beyond your bank account information, payday lenders will often require you to provide other sensitive personal details including:

• Your full name
• Date of birth
• Phone number
• Email address
• Home address
• Social Insurance Number

These questions are common with most loan applications, but you should make sure your lender has a secure application page with “https” in the web address, like below.

Available options if you don’t want to use a bank account

Unfortunately, there aren’t many payday lenders out there willing to extend loans to people without bank accounts. You’re unlikely to find a lender that doesn’t at least require a bank account to confirm your financial status, but that doesn’t mean there aren’t options. As long as you can prove your income, you may be able to find a lender that wants to work with you.

• Provide collateral. An auto title loan is an easy way to get a small amount of cash to cover an emergency debt without providing your bank account details. However, keep in mind that securing a loan with your car or other vehicle can result in repossession if you fail to repay. You usually have to outright own your vehicle in order to take out an auto title loan.
• Visit a store location. If you’re able to visit a payday loan store location in person, you may be able to receive your loan as cash or as a cheque by simply providing pay stubs or other verified proof of your income. You can then possibly repay your loan in the same manner.
• Request a prepaid debit card. You may be able to find a lender that offers loans that can be loaded onto a prepaid debit card, which means you won’t be asked for your bank account information.

Bottom line

Most payday lenders ask for your banking details in order to transfer your loan into your account and to automatically debit your repayments when they are due. You should still be wary of lenders that don’t have secure websites or request a fee to fill out the application. If you aren’t comfortable providing your bank account information, your loan options are limited, but you do have alternatives to explore.

Frequently asked questions

• Can lenders see your bank account?

  A lender cannot see how much is in your bank account without you providing them bank statements for your accounts. For example, payday lenders may ask you to supply recent bank statements showing your account balance in order to prove you have enough money to repay a loan. Otherwise, lenders should never ask for your login credentials to see your bank account on their own.

• What happens when my loan is due?

  When your loan is due, the lender will automatically withdraw the payment directly from your account. Make sure you have enough funds in your account to avoid fees.

• How do I know if a web page is not secure?

  Page security is the first thing you should look for when browsing a lender's website. There should be a small lock in the address bar that indicates the page is secure, as well as an "s" after the http. Additionally, the lender should have information on the encryption service it uses easily available in its FAQ or on its privacy policy page.