The 7 key benefits of taking out payday loans in Ontario

August 25, 2020 - Money

Sometimes, you may find yourself in need of a loan for personal reasons. For instance, you might want to take a holiday to some amazing places or visit unusual cities worth seeing in your lifetime. Or maybe you suddenly need to have a medical procedure done ASAP, but you lack sufficient funds in your bank account. 

Whatever the reason, it’s a plus when you’re able to get a payday loan right away; because you’ll be able to address that situation. If you’re contemplating taking out a payday loan, these are the key benefits you should know about:

You can find payday loan lenders easily

There are usually some retail stores within Ontario that offer payday loans. You can also look online to find Ontario-based lenders, simply do an Internet search for ‘payday loans Ontario.’ 

To offer payday loans to the public, the lender must be registered and licensed by the government of Ontario, Canada. Therefore, all lenders who offer payday loans must adhere to the terms of the Payday Loans Act 2008. You can apply for a loan knowing that you’ll enjoy some protection from unethical lenders who exploit people in vulnerable financial positions.

It’s okay to borrow a small amount

Borrowing a small amount in an emergency is a valid reason to seek out payday loans. The usual amount you can borrow from a payday loans lender is not more than 50% of your net income. It’s okay to borrow up to $1,500 at one time. But the rules change if you take out a succession of three loans within a 63-day period. In that case, the lender may offer you an ‘extended payment plan’. 

The aim is to make repayment doable, even if you take out so many loans in such a short period of time. Around 50% of people who resort to borrowing from payday loan providers rely on this option purely for emergencies. The other 50% get payday loans because they have necessary payments to make on a regular basis. Whichever of these applies to you, the point is that other people have tried to solicit loans from payday loan providers too—so it isn’t so unusual nowadays. You just have to make sure that you can repay that small amount you borrowed within the time allotted.

Processing a payday loan is fast

The good news is that the law has made it easier on borrowers who turn to payday loans for a quick influx of cash. You won’t have to post collateral of any kind, nor do you have to submit to a credit check. If you don’t have a credit card or can’t secure a personal loan right away, the payday loan may be a good source of emergency funds.

Some lenders will be able to issue a payday loan to you within the same business day that you applied for a loan. To compare, banks may take up to five business days to process your application and release a loan. However, the advantage of payday loan lenders is that they’ll agree to lend small amounts whereas banks generally refrain from dealing in small loans.

Borrowers who are employed for only three months qualify

Usually, a payday loan lender will only ask for proof that you have been employed for the last three months. You also have to prove that you live at the address you indicated, by giving a utility bill or other valid proof of billing. When you’re approved for the loan, you can expect the amount to be deposited directly into your bank account. Otherwise, the lender will give you cash. Some lenders will issue you a prepaid card and course the loan through that.

There is a ceiling for the pay day loan fee

Based on the Payday Loans Act 2008, the lender can charge an applicant a maximum of CAD$15 (Canadian dollars) per $100 borrowed for a payday loan. Therefore, you won’t be overcharged, especially at a time when your funds are depleted and you really need a quick influx of cash. If the lender you contact insists on a high interest rate for repayment, you should report them and look elsewhere for a payday loan. There is also a two-day “cooling off” period wherein you’re allowed to cancel the loan contract if necessary.

In connection with fees, the lender can’t post any other “offers” or advertising about products and services in relation to your payday loan. This applies even if the offer is about someone else’s products and services, not the lender’s own offerings. In addition, the lender isn’t allowed to extend the contract beyond the agreed-upon termination date. Nor can the lender expand the agreement through a rollover of the previous or ongoing payday loan into a new period. In fact, if you haven’t paid your current loan yet, you aren’t allowed to apply for a new payday loan.

Lenders aren’t allowed to deduct from your paycheck

Despite the fact that you are taking out a payday loan, the law prevents lenders from automatically debiting loan repayments from your wages. You must agree with the lender on a certain date you intend to pay for the loan. You also have to stipulate on the loan form how much you are borrowing, and what you are willing to pay to be allowed to borrow. 

To repay the loan, you have to give a post-dated check. If you don’t have a checking account, you may use your debit savings account instead. The payment will be withdrawn directly from your debit savings account through a manual “pre-authorized debit” process. 

The lender is legally obliged to accept your payments at any time, even if the due date hasn’t arrived yet. It would be good if you were able to repay your loan in full and on time, though. That way, you wouldn’t have to pay any additional late payment fees.

On the other hand, if your post-dated check doesn’t have sufficient funds, or if your debit account lacks funds, the lender can’t process your payment more than once. This is because you might become liable for a ‘no sufficient funds’ (NSF) penalty from the bank. If the lender does attempt a second time, or makes other subsequent attempts to process your payment from the same bank, they will be legally obligated to pay the NSF penalty imposed by that bank.

Lenders cannot resort to unwarranted pressure to make you pay the loan

Lenders are allowed to remind you to repay your loan three times per week, maximum. Beyond that, it’s considered illegal. Lenders can’t contact you on holidays either. They can’t resort to contacting people close to you—your immediate family (spouse and children), relatives, friends, or even colleagues or acquaintances—with the intent of pressuring you to pay up.

In addition, lenders are not allowed to resort to threatening, or violent or forceful language when they communicate with you. Nor are they allowed to pressure you in any other way. For instance, the contract that you signed with the lender is private. Thus, the law forbids lenders from using the information you provided against you, by “exposing” sensitive details about you to anyone, for any reason. 

Some lenders may also illegally seek repayment of your loan through other people, such as close relatives and friends. If this happens, you have the right to report them to the Ontario Ministry of Government and Consumer Services. A lender who doesn’t follow the rules may be fined or even lose their license. 

However, the government would want to know why you haven’t paid the loan either. Since a borrower of a payday loan is usually required to pay from their next paycheck, you need a valid reason not to pay the loan on the agreed-upon date. If you don’t repay your loan on time, you’re breaking the contract you signed with the lender. There would probably be an investigation to determine why you reneged on your agreement with the lender.

The final word

Canadians and foreigners living in Ontario are alike in one sense—they all have the risk of being confronted with emergencies that can deplete their resources. This proves true for both low- to middle-income residents, and even for those in higher income brackets. 

One solution is getting a payday loan from a licensed lender. Though some lenders who offer payday loans may have a negative reputation, the truth is that they serve a necessary need. If you are in dire financial straits and really need a quick source of funds, payday loans may be just what you require. As long as you have sufficient income coming in, you may be reasonably sure you can repay your payday loan on time and in full without issues.

So, the next time you find yourself strapped for cash and facing an impending bill payment that can’t be set aside, you may want to check out payday loans. Just read the fine print and be sure you know what you’re getting into before you sign any agreements.

 

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