Even the most budget conscious people find themselves unable to cope with unplanned expenses. When you are short of cash and pressed for time, waiting for the next salary may not be an option. With today’s economy, borrowing money from relatives and friends is not an easy thing to do – and you will not always be successful. Where do you turn?
While it is true that high income families also experience cash difficulties, there are a lot of options available to them – such as bank loans with low interests and credit cards which they can use to tide them over. This is because their credit ratings are good and banks are willing to lend them money. What are your options if you are in the low to middle income bracket with a poor credit rating? You may have managed to turn your finances around and found yourself a nice stable job, but banks look to your credit history. It may sound unfair but that’s just the way it is.
This situation has given rise to the popularity of Payday Loans. As the name suggests, it is an unsecured loan that you can avail of and settle on your next payday. This type of loan is available to the masses – people who have stable jobs but not too perfect credit records. You guarantee payment by issuing a post-dated check or pre-authorized debit. The only requirement for this type of loan is that you should be employed and above 18 years old. Payday Loan companies do not investigate your credit record. For this service and consideration, they charge very high interests. If you compute it on an annual basis, it comes to around 500% per annum!
In so many ways, Payday Loans are great when you need cash for emergencies. It’s a valuable option, if you can afford to pay it on time and you don’t mind paying the interest. Where else can you get a loan within a few hours – even with bad credit? You can even apply online, in the comfort of your homes. All you need is to submit the few requirements and you will be able pay off your obligation. When a loved one is ill, having the money to get them adequate medical support is more important than the high interests. When your car breaks down or when your short on tuition money, Payday Loan lenders are heaven sent. The problem is, people get addicted to this easy cash option and they start to think that buying the new iPhone model is an emergency expense. Then they start overspending.
Payday Loans have a lot of detractors and federal and provincial governments are keeping a close watch on this industry. They want to ensure that borrowers are not exploited due to their financial needs. People who avail of this loan, however, don’t agree that they are being exploited, until the time they fail to make payment and default on their debt. Then the interest starts to pile up and they are unable to get out of the destructive debt cycle. It happens to many people. It’s easy to get the loan, and it’s also easy to forget that it needs to be paid in 15 days, on the next salary.
What most people are not aware of is that there are other loans that they can look into as an alternative to Payday Loans. There are cash loans, personal loans, and short-term loans. These are also unsecured loans that you can avail of even with bad credit. You can get the loans on the same day provided that you submit all the requirements. The difference is the payment terms. These companies offer a month up to 3 years to repay your debt, whichever you are most comfortable with. Longer payment terms mean that you can budget your money, instead of your whole salary being allotted to repay the loan.
Payday loans, Personal Loans, Short-Term loans are all services that help people with not so perfect credit ratings, when they need cash to pay off emergency expenses. It is a service not offered by other financial sources. The relief and assistance it offers and its value cannot be discounted. With today’s economy, having these options can mean survival for a lot of families. The only thing that borrowers need to do is to be prudent and responsible when availing of these loans.
A study on the popularity of Payday Loans reflect that medium income, educated families comprise a large percentage of the borrowers. We can assume that these types of borrowers are capable of finding out the terms of the loan and determining whether they can repay the amount comfortably.
Before applying for any kind of loan, the following points should be taken into consideration:
Amount of the Loan – how much do you really need?
Interest Rate per Annum – what are the interest rates?
Annual Percentage Rate – this includes fees and service charges applied to the loan
Payment Term – how long can your repay the full loan amount?
Start of the Loan – when will the lender start charging interest?
Monthly payment – how much do you need to pay monthly?
Applicable Fees – what other fees can you be charged with?
The Payday Loan industry continues to thrive. Unless traditional banks rise to the occasion and come up with a way to offer loan options to people with poor credit histories, it will continue to be a popular option for low and middle income earners. However, banks are not too keen in bridging this credit gap, it seems. The annual earnings of Payday Loan lenders have been estimated at $2 billion annually. The Canadian Payday Loan Association and provincial and federal governments continue to regulate this industry to protect its borrowers. However, there is no protection in place from the borrowers themselves.
Since these loans are fast and easy to get, borrowers often overspend and default on their loans. We aim to remind people of their accountabilities and provide guidelines on how the advantages of these loans can be enjoyed without having to experience the disadvantage. The downside of borrowing excessively can lead to an unending cycle of debt and bankruptcy.
Proponents of these short term loans defend the importance of these services in their day to day lives. Company loans are not always an option and with today’s economy, borrowing from friends and family may be construed as an imposition. Most people do not want to air their needs. Payday Loans are discreet and private. It has become even more private with the advent of online payday loans – which allows borrowers to apply in the comfort of their homes. Not everyone enjoy being seen by friends when they go to lending companies – and the lending companies are aware of this.
Some people just need cash for unplanned expenses and would like to repay it in a short time. The payment term is important as this allows borrowers to spread their payments and better manage their finances. They can be called by different names, Short Term Loans, Cash Advance Loans, Payday Loans or Personal Loans – but they are all similar in that they provide financial assistance to people with poor credit histories but have regular jobs. Lending companies who submit the reports to the credit bureaus give chances to people to rebuild their credit ratings. The difference between the many types of short-term loans is the amount of interest they charge and the payment terms that they offer.
Here are some alternatives to Payday Loans:SHORT TERM LOANSBC-Loans offer an alternative to payday loan that can be utilized by Canadian citizens with poor credit rating. You can apply online or through phone and your application can be processed and approved in 1 hour or less. Payment terms range from 7 days to a maximum of 90 days. You can choose to pay in 3, 6 or 12 installments depending on how often you get your pay. The APR or Annual Percentage Rate is computed at 28 to 32%.
To be eligible for the loan, you need to be 18 years old and above, have a stable job and you must be paid by your employer through direct deposit in a Canadian bank account. After applying online or over the phone, an agent will send you an alternative to payday loan contract and a brokerage contract. You will need to send these contracts and the required documents back through email or fax. After approval, the funds will be deposited directly to your account within the day.
Loan amounts offered are $500, $600 and $700.
For more information, you can visit their website at https://www.bc-loans.com/PERSONAL LOANS:Creditloans Canada Financing Inc. is offering urLoan™, a simple online personal term loan service. They offer 2 types of loans – Personal and Debt Consolidation. Just like a Payday Loan, it is unsecured and you can avail of it even if you have a poor credit rating. Since they report to the credit bureaus, they give you a chance to rebuild your credit standing. Once you submit the requirements, the approved loan amount is determined by your employment and income. Everything is done electronically. Within 24 hours, your loan can be approved and you will receive the funds in your bank account in 1 to 2 days.
You can loan amounts from $1,000 to $15,000 and a payment term of up to 36 months. They charge an APR or Annual Percentage Rate of 29-46.95%.
Fast Access Finance offers an unsecured personal loan of up to $5,000. Like all of the above mentioned loans, you can apply even if you have poor credit. Loans are processed and approved within 24 hours. Application is done online in the comfort of your home. It’s easy and private. They offer longer payment terms of up to 3 years. Requirements are submitted electronically.
The payment term offered by Fast Access Finance is from 3 months up to 3 years. The loans are funded remotely to anywhere in Ontario. While they approve loans even from borrowers with poor credit ratings, you shouldn’t be in a Consumer Proposal or a Debt Management Plan.
CashMoney offers a Personal Loan with a payment term of 6 months to 24 months. You can loan $500 to $4,000. All you need is a stable source of income and a bank account. They will not require a post dated check, but submitting one can speed up the loan process. In most cases a 30-day bank statement is the only document you need to submit.
If you loan an amount of $1,000 for example, the interest is $210 payable in 12 monthly installments. Payment can be scheduled to match your pay cycle – through automatic bank debit. If you require another loan during your payment period, this can also be accommodated up to the full amount you were approved for.
CashMoney also offer conventional Payday loans for smaller amounts which you can pay on your next payday.
CREDIT UNION LOAN
Credit Unions are scattered all over Canada. It’s not a bank, but an alternative to banks. To avail of their services such as loans, you need to become a member.
TransCanada is an example of a credit union which offers a 3% interest for loans granted. The downside is that your credit rating is considered. Being a member though, your relationship and payment history with the company is referred to when you apply for a loan. A good financial history with them may lead to loan approval.
CREDIT CARD CASH ADVANCE
If you have a poor credit rating, but own a credit card, getting a cash advance may prove to be more cost effective than getting a Payday loan. Interests are approximately 25-35% APR. A high cost but still lower than the conventional payday loan.
Private lenders are usually local businesses that offer secured and unsecured loans. You can find these establishments all across Canada. Their rates are reasonable and lower than conventional payday loans.