Most traditional loans require extensive paperwork and one needs to have a decent credit history and score to even have a chance of being approved. However, payday loan regulations in Canada are extremely lenient making payday loans not just beneficial for employed individuals but also for college and university students.
Expenses such as tuition fees, books, social gatherings, groceries, rental payments, utility bills, car maintenance, etc. can all add up. Managing these expenses can become difficult for any student, especially, since they are unlikely to have much experience when it comes to money management and likely don’t make enough to save for emergency situations.
To help out with short-term financial woes, payday loans can prove to be a beneficial option. Let’s take a look at why.
How Do Payday Loans Work?
A payday loan, also known as a cash advance is an unsecured loan of generally small amounts (under $1,500). These loans are generally associated with short payback periods; until one’s next paycheck or within 62 days in some provinces.
To be eligible for a payday loan lenders require proof of regular income, a valid bank account, and a permanent address. No credit checks or background checks are required.
To apply one simply fills out a form and signs an agreement that allows the lender to directly withdraw the total amount of the loan plus fees on their next paycheck (pre-authorized debit).
Some lenders will also accept a posted check for the total loan amount plus fees. No collateral of any kind is required.
Why Payday Loans For Students?
Going to college or university is the next step to entering practical work life and becoming independent. However, starting life as a college or university student isn’t easy. Full-time jobs are not only hard to come by but also not feasible along with your studies.
Not being able to earn enough to make ends meet let alone having to pay for unforeseen expenses can put a lot of strain on students. This is why payday loans are so popular amongst students in Canada. Both local and international students depend upon payday loans to help them out with short-term financial troubles.
Payday loans require no collateral and can be approved in under an hour making them highly convenient and easy to secure. As long as a student even has a part-time job they are eligible to secure a loan. Students with bad credit or no credit are also eligible to apply for payday loans.
Even though payday loans are more expensive than a line of credit, overdraft protection, or even a cash advance on one’s credit card; students are unlikely to have these options available to them. In many instances, payday loans can be the only source of credit that students in Canada can avail themselves.
The other advantage or benefit of payday loans is that it doesn’t impact one’s credit score. The last thing a student wants is to wrack up debt during college or university that adversely affects their credit score. This can make life even more challenging down the line.
What Happens If You Are Unable To Payback The Loan On Time?
There can be consequences for not paying back a payday loan within the agreed-upon timeline. Lenders can charge additional fees and interest on any late payments. The lender can also contact you or any associated next of kin to try and collect the money. In some cases, the lender can also choose to sue you for the outstanding debt, seize your personal property, or even “garnish your wages” by going to court.
Remember, it is only in situations where you don’t pay back the amount borrowed or choose not to can a lender send your details to a collection agency. In this case, the loan amount will also show up on one’s credit score. Hence, it is always best to pay back the loan on time to avoid any penalties and serious consequences.
If a student is unable to pay back the loan amount and associated fees on time they should make the lender aware. In certain provinces, the loan amount can be rolled over or extended which can buy more time to pay outstanding dues.
How to Choose The Best Payday Loan Provider
When searching for a Red payday lender there is certain information that as a student you need to carefully consider.
The first thing you should ask is the cost of borrowing. This includes any and all associated fees, interest, and other charges. The next thing you should ask is when the loan would be due in full. Also, it is always best to ask about any fees and other charges that you could incur if you were unable to pay back the loan on time.
Asking these questions is important as each province or territory in Canada has its set of regulations regarding payday loans. As a student, you should always ensure that whatever lender you choose is licensed and meets provincial regulations.
It is also a good idea to ask about the ‘cooling period’. This is a grace period of 1 or 2 days in which a borrower can cancel the loan by paying the money back without having to incur any penalties or charges.
Always ask for a copy of your payday loan agreement and make sure that you read this document carefully before signing.
Whether you choose an online lender or a storefront asking these specific questions can be hugely beneficial in deciding which lender to choose from.
In Canada, a large majority of payday loans are actually taken out by college and university students rather than employed individuals. This may seem surprising to some but the sad reality is that students are more vulnerable to needing money urgently as they likely have little to no savings and no credit.
As such, payday loans can be a boon for students in Canada!