Payday loans might seem like an easy solution, but despite being more regulated than in previous years, the basic principle remains the same: fast cash at high rates. If you are absolutely sure you can make repayments on time and in full, payday loans offer a quick and easy way to obtain money at short notice. Here are some questions to ask before borrowing:
1. Is My Lender Licensed?
When using any financial product, it’s a good idea to shop around. If you are based in Canada, My Canada Payday provides this service. It’s wise to beware of unscrupulous lenders, as they could seriously damage your financial health. Always check your lender is fully licensed and registered before borrowing or giving any of your personal details.
2. What About Other Options?
Exploring alternatives might include other financial products, or asking for additional hours at your workplace. You can potentially also ask to borrow from friends or family, though this could affect your relationship, so be courteous and careful.
3. How Is My Financial Health?
If you are already struggling to pay off debt, a payday loan is not the answer. Instead, deal with the debt you are currently facing head-on with the help of a regulated financial advisor or local debt charity.
4. Do I Really Need This Loan?
Quoting Quidable, it’s best to have a clear objective before taking out any kind of loan, it’s best to have a clear objective, so be specific. Applying for a payday loan because you are overdrawn is not a wise idea, whereas taking one out to cover an unexpected utility bill may be a viable option.
5. What’s the Total Cost?
Payday loans often come with hidden fees and charges, so check these before you apply. On top of the amount borrowed, you should expect to pay fees ranging from $10 to $30 per $100 borrowed, which over two weeks equals an APR of around 400% or more.
6. Will I be Able to Make Repayments?
Always check your budget to make sure you will be able to make repayments (typically by the time you receive your next paycheck).
7. What Penalties Are Involved?
Check what the penalties are should you miss a payment (missed payments can have a negative impact on your credit score). In some places there may be a maximum cap on charges, so be sure to check whether this applies.
8. Can I Cancel or Back Out?
If you have doubts about being able to pay the loan back, some lenders provide a grace period of one day in which to cancel it. As with all other financial products, check what the rules are for your particular lender.
9. Do I Need to Provide any Documents?
To apply for a payday loan, you need to meet your lender’s eligibility requirements. You may also need to provide documentation. This may include:
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- Proof of income
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- Bank account details
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- Bank statement
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- Email address
10. Read the fine Print!
Before using any form of financial product, read the fine print. Application requirements, fees, terms and expectations may all vary depending on the lender you choose, so always check what the rules and regulations are for your chosen lender.
