Real payday loans
There are plenty of providers in the payday loan space, but how do you know if you're dealing with a real lender?
A short term loan, also commonly referred to as a payday loan, can help you get through a time of financial hardship. Getting access to a payday loan can be a quick and easy process if you meet some basic eligibility criteria. While you can find multiple options online, not every lender that offers short term loans is a real and trustworthy lender. Some lenders operate as intermediaries or loan-matching services, while others are simply there to scam borrowers.
Fortunately, there are many real and legitimate short term lenders in Canada. Here’s how to find real payday loans and lenders, and how to avoid the ones merely looking to take your money and run.
⚠️ 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 the Credit Counselling Canada on 1800 007 007. It is open from 8:00am to 5pm, Monday to Friday. When comparing short term loans, ensure you take into consideration any fees, charges and rates you may be charged.
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.
Cash Money Payday Loan
- Minimum loan amount: $100
- Maximum loan amount: $1,500
- Interest Rate: Varies by Province
- Fees: Up to $17 per $100 borrowed (rounded to nearest dollar)
- Loan term: 12-14 days. Varies 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 short term loan options from legitimate lenders
Check the websites of any lenders you’re interested in to confirm they operate in your province of residence.
What is a “real” short term loan?
A real short term loan is one you get through a direct lender. A direct lender has its own underwriting department and makes its own lending decisions. This lender will stick to any rules and regulations set by the provincial government.
This is in contrast to a loan-matching service or an aggregator that collects your information and passes it on to a pre-selected group of lenders. This can lead to you receiving scores of unsolicited offers, some of which might be scams. Searching online is also likely to turn up untrustworthy scam operations alongside the legitimate ones.
With a real short term loan, you can expect to find out if the lender approves your application almost immediately. If approved, you can usually get access to your funds soon after, typically by the next business day. However, the time it takes depends on the lender you choose as well as whether you apply in person at a store or online. Applying in store is usually faster, allowing you to leave with your loan in hand within the hour normally.
How can you identify a “real” short term lender?
Distinguishing a real short term lender from a potential scam is easy if you take time to thoroughly research and compare the following:
- Interest and fees. A real payday lender will abide by any laws set at the provincial level. These laws typically set a maximum amount that can be charged by the lender per $100 borrowed. Trustworthy lenders will display their interest rates and fees clearly and won’t hide any charges from you.
- No guarantee of approval. If you encounter a website that claims to provide guaranteed short term loans, you should immediately be wary of their claims. While it’s true that most short term lenders have more relaxed lending criteria than banks and credit unions, all lenders always look at a borrower’s ability to repay a loan before approving it. No loan should ever be guaranteed.
- Loan amount. Legitimate payday lenders will not allow you to borrow more money than you can afford to pay back. Some provinces also have laws in place that state how much you can borrow at one time.
- Reputation. Seeing what previous borrowers have to say about a short term lender should give you some indication of how the lender deals with borrowers. Don’t limit yourself to reviews on the provider’s website, because these can be faked. Use Google to find comments about the provider on other sites and determine if they are reputable or not. Keep in mind that most people only leave feedback when they are really happy or really angry, so take each comment with a grain of salt.
Tips to identify a “real” short term lender online
These tips can help you be confident that you’re dealing with a real online short term lender:
- The fine print. Review the website of any lender before submitting an application. Look for any mentions of affiliates or lender partners to know whether you’re dealing with an aggregator or a loan-matching service.
- Licence information. You can expect a real short term lender to display its licensing information on its website. You will also find details of relevant accreditations. Lenders must abide by any regulations set by the provincial government.
- Contact details. Look for contact details no matter which short term loan provider you select. If you find no more than an email address, you might want to consider moving on to your next option. Some direct short term lenders offer customer service via live chat and some offer support over the phone. Look for a physical address for the lender’s headquarters or a registered office. If you contact the lender and they take a few days to get back to you, use a different lender.
Is there anything to consider before applying?
Before applying for a short term loan, you should consider the following:
- If you don’t think you will be able to make your loan repayments, reconsider applying for a loan in the first place. You will face additional fees if you make late repayments, which will make your loan even more costly.
- If you don’t make your repayments on time, you can also negatively affect your credit score. Not all lenders will report you to a credit bureau for this, however this is at the discretion of the lender.
- Don’t skim over the loan contract. Read it thoroughly and understand all of the terms and conditions. You are not obligated to sign a contract, so if you disagree with any part, simply move on and find a different lender.
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 these territories at the federal level only.