How Do Payday Loans Work? What to Expect When You Get One

How Do Payday Loans Work? What to Expect When You Get One
7 Min Read

People bring them up whenever they are in dire need of cash to pay off emergencies.

Did you ever wonder why people chase payday loans despite having several other lending options? People bring them up whenever they are in dire need of cash to pay off emergencies or when their salary is not due yet. Are you wondering if payday loans are a viable solution for your short-term needs?

If yes, you are in the right place. Through this brief guide, you will be able to learn everything about these payday loans and what to expect when you get one. Let us get started.

First things first: Problem with the traditional lending solutions - Banks

If you have ever applied for a loan at the bank, we bet you know that the chances of getting your loan approved are less. Whether it is a personal loan to clear the dues at a hospital or an auto loan to buy a car, your application could be rejected for several reasons ranging from a poor credit score to having no credit history.

Unfortunately, many of us have subpar credit scores. It is sad how those with good credit scores also wait for several weeks to get their loans approved. But what if you have an unprecedented emergency that you need to deal with? This is where payday loans come into the picture.

How do payday loans work?

Payday loans are quick loans that provide instant financial help. You would be surprised to know that most payday loan amounts range from 50 CAD to1,000 CAD. As is obvious from the name, the loans have to be cleared on your next payday, which for many loans is less than two weeks.

Advantages of payday loans

There are two major advantages of choosing a payday loan for your financial emergencies:

These loans do not require a good credit score on your part.

The lenders do not take more than 24 hours to approve or reject your application.

You do not need to apply for the loan in person. You can send in your application for a payday loan online too. Most payday lenders now accept such applications. In case they approve your loan, the money is directly deposited into your bank account.

Disadvantages of payday loans

Payday loans have demerits of their own. Here are the downsides to payday loans:

If you cannot pay back the loan within the due date, a high-interest fee will be charged as penalty.

This is not a scam but just a policy/incentive that ensures you pay back the loans on time.

Requirements for Payday loans

As stated above, you do not need an amazing credit score to get a payday loan approved. These are not long-term loans, so the lender does not need any proof of your credit history. The only proof they need is your payslip, so they know if you will be able to clear the due on your next payday.

All they ask for is proof of a stable income. They do not dig into your credit history, and you just need to show them proof of your employment for the past three months. However, some payday lenders are particular with the amount of monthly income.

If you do not earn as much as the requirement mentioned by them, your application will not be processed. Some other important requirements include the following:

Proof of identity

Legal age of applicant (18 years or older)

Proof of his/her Canadian citizenship

Canadian bank account that is at least 3 months old

Proof of Direct deposits from employment

In addition, you also cannot be bankrupt or be on the edge of bankruptcy. This implies that your application will be rejected right away if you have too many short-term loans to clear or insufficient funds transactions.

Should you get one?

The most common reason for people choosing to opt for payday loans is to get financial aid in an emergency. For example, you need to clear your internet dues by the weekend but your salary isn’t due until the week later.

Instead of getting that internet connection disconnected and paying a penalty, you can choose to avail payday loan in 24 hours and then pay the bill.

We suggest you choose reliable and trustworthy lenders like PaydayMe who have been in the payday business for several years now. Immediately after you receive your salary, clear the loans to keep high-interest charges away!