Payday Loan Alternatives
Payday Loans have gotten a bad rep these days, and banks aren’t always an option for many Canadians, whether it’s because of their credit or simply the inconvenience of going into a bank.
While this is where payday loans and cash advance apps can come in handy since other loan types require additional approval factors, there are some alternatives that allow you to avoid payday loans.
Cash Advances Before Your Next Payday
What if you’re facing an urgent repair, medical bills or unexpected household expenses? If a traditional lender finds your credit rating situation less than perfect, for example, when you’re first starting out with no credit history, then you’ll have to look elsewhere to meet your needs.
Reflect carefully before asking a traditional lender for yet another reason: if they refuse your loan application, that may indirectly affect your credit rating. That’s because you’ll need to apply for credit again, and every hard inquiry will affect your credit score.
Some other options you may have include:
Credit Card Cash Advances: If you need some extra cash, you can take out cash at the ATM using your credit card. That said, there will be extra fees and likely a higher interest rate. You also need to stay within your limit.
Credit Card Limit Increase: If you have a good payment history and haven’t had a large increase recently, your credit card issuer may be able to increase your limit. You can request this online or over the phone.
Overdraft Protection: Even if your bank is unable to give you a loan, it may be able to give you an overdraft. This is normally a line of credit linked to your chequing account. The amount you get starts at $500 and is dependent on your bank.
Alternative Lenders: In Canada, borrowing money can be easier with an alternative lender. They normally offer faster loans and don’t have strict credit score requirements. You may even be eligible for a few thousand dollars
.Best Alternatives to Payday Loans
The Installment Loan
- This type of loan can also be a short-term way of borrowing money, but it is definitely much longer than your next pay period. It is not limited to a percentage of your paycheque, as it can be an unsecured loan. It has many installments to pay back. It could be for several weeks, months, and, in some cases, years, depending on the amount.
- This type of loan also has a speedy application processing time and can be just as convenient as a payday loan.
- This type of loan also imposes expensive fees for missed or late payments.
- The good news is that although the interest rate is usually higher than that of a traditional lender when you borrow money, your monthly payments (instalments) will not change, and that predictability allows you to set and keep to a new budget.
- In addition, making on-time payments will improve your credit rating, while a payday loan, paid back on time, won’t (unless the company has some rare bonus in place to do that – but most don’t). This is because installment loan lenders report to the credit bureaus.
- This type of loan has no hidden fees. That said, some personal loan lenders do charge origination fees.
E-transfer Installment Loans
Besides the privacy that you enjoy with an e-transfer loan, you can apply online at any time, and the money can be directly deposited into your account on the same day, so you can spend it immediately on whatever you want. These are offered by Spring Financial and other alternative lenders like Fairstone Financial Inc.
Payday Loan Alternative for Bad Credit
Just because you have bad credit doesn’t mean that payday loans are your only option. There are many online lenders that offer personal loans for those who have bad credit.
While you may not be able to get as large a loan as you could if you had good credit, you will receive more than you would with a payday loan. You’ll also get a much lower interest rate since personal loan interest rates in Canada can’t go above an annual percentage rate of 35%.
The terms also range from 6 months to 5 years, so you don’t have to rush to pay back the funds. They come out of your account on a scheduled basis, and making these loan payments on time even increases your credit score.
Payday Loan Alternatives With No Credit Check
While there are some payday loan alternatives with no credit check, you do have to be careful because not all online lenders are legitimate. Even legitimate lenders will have very high interest rates. They may not be as high as payday loans, though, so it might be a good idea.
Unfortunately, the most legitimate no-credit-check loans are usually made through payday loan companies. However, because they’re personal loans and not payday loans, they do have lower rates. They are higher than online loan lenders, though.
If you’re looking for a much different type of lending, though, there’s always peer-to-peer lending. This type of lending is done through online sites and is when investors offer loans at different interest rates.
Because you aren’t dealing with traditional lenders, there are many different interest rates and fewer requirements. If that doesn’t work for you, then a good option may be to ask family members for money.
Why Payday Loans Have A Bad Reputation
Often synonymous with “loan sharks,” payday lenders have gained a bad reputation for creating more financial difficulties with borrowers. Here’s a look at how.
- High interest and short-term repayment schedules can create a cycle of “borrowing to repay.”
- Payday loans will tighten an already tight cash flow (because of the added fees that payday loans charge in such a short time frame), which can worsen a financial situation rather than improve it.
- Borrowers may find themselves being loaned more debt than they can actually afford to repay. This can eventually lead to the payday loan cycle, which is very hard to break.
- If you’re unable to pay the debt back, then it may be sent to a collection agency.
This is wh,y if you have a credit card, many choose to get a credit card cash advance.
What Payday Loans Are
Payday loans are very short-term, generally for 14 days or less, and are secured by, and therefore limited to, a percentage of your paycheque. The amount you borrow depends on what you earn. Borrowing rates are set by provincial law and vary from province to province.
How Payday Loans Work
Payday loans have a streamlined application process where you provide:
- your bank account information
- your employment information with a pay stub
- a post-dated cheque or withdrawal authorization
You can re-borrow after repayment of your first loan and again in another pay cycle. This type of loan is very fast and easy, whether you go in person or complete it all online or a bit of both. There are high additional fees if your payment is returned for insufficient funds, in addition to what your bank will charge.
Who Gets Payday Loans
This loan is generally for those who:
- need money quickly
- need more than just a few bucks that they could borrow from a friend
- don’t have credit available to them on a credit card.
People get payday loans when they just don’t have enough money to pay for what they need or want, an, often,don’t have solid enough credit to be approved for another lending source.
Some people only need a few hundred to get them between paycheques, but some need a lot more and have to settle for borrowing smaller chunks at a time.
Some lending companies prey on lower-income recipients, often setting up shop near low-income housing. Various provincial & municipal governments have been cracking down on this lately, but it doesn’t seem to help.
Low-Interest Payday Loans
Unfortunately, there is no such thing as low-interest payday loans. These loans are known for being as high as 300% and require payment by the next payday. Really, the only way to go with a low-interest loan is to go with a personal loan, whether it be with an online lender o, traditional bank or a credit union.
Find A Lender In Line With Your Life Goals
You may need a new or fresh start for your credit rating, or you may have recently incurred extra expenses and credit rating issues following challenging life events, such as a marital breakdown.
You may even have received credit counselling suggesting you consolidate all your debts together to better manage them, allowing you to stick wtoa new budget. A personal instalment loan paves the way for manageable cash flow, allowing you to budget for and achieve goals that seemed out of reach.
Reasons To Get A Personal Loan
While it may be tempting to get a payday loan, personal loans allow you to get a larger amount of money. Many choose to use this for debt consolidation loans, which can condense your multiple debts and debt payments into one monthly payment and make it easier for you to pay off. This is the easiest way to do this without getting a credit counsellor, and it helps you obtain financial freedom.
Another reason to get a personal loan is to increase your credit score. This credit line will be added to your credit report, and all positive payments will be reported to the credit bureaus. This allows you to get out of the payday loan debt cycle while increasing your credit. They also have flexible debt repayment plans, which can make paying off the debt easier.
Many people think you need employment income to get a personal loan with interest rates, but you don’t. Many types of government assistance are accepted as forms of steady income, allowing you to increase your credit score while getting some extra cash. While you may still have high interest rates, they’re much lower than payday loans.
How Spring Instalment Loans Are Better Than Payday Loans
At Spring, we believe personal loans should be simple, fast, and convenient; let us help you with your fresh start with a Spring loan.
- Any Credit Approved: This type of loan is approved for every type of credit rating.
- Online Application: This type of loan application can be completed very quickly online, with a quick turnaround time, indicating the terms offered to you.
- Loans over the Phone: You can even get approved by phone or text from wherever you are.
- No Appointments: Spring is completely online, meaning you don’t need to take time off work or spend your weekend in a bank or in line at the traditional Money Mart or Cash Money
- Canada-wide: We serve all of Canada. Whether you’re from British Columbia, Alberta, Ontario, or all the way in Nova Scotia, we can serve you.
- Borrow up to $35,000: Spring can approve loans from $500 – $1500, all the way up to $35,000.
- Customer Service: Spring Customer Service is tailored to your needs… Want to do the entire process by Text Messaging? Or talk to a human? Have it your way!
The Process of Getting a Personal Loan
If you’re having financial difficulties, personal loans in Canada can help. That said, most lenders require some documents and information before they can get you the funds that you need. Here’s how the process works.
- Fill Out an Application: This will ask for your full name and information, employment information and anything else important to the lending process.
- Submit the Required Documentation: This is needed to meet the eligibility requirements. You’ll need proof of income, government-issued ID, and proof of address.
- Consent to a Credit Check: After a pre-approval with a soft credit check, you will need to have a hard credit check done. Lenders require this to determine your loan eligibility and interest rate.
- Sign Your Loan Agreement: Once you’ve discussed your loan options and repayment terms, you will need to sign. You’ll also get to keep a copy of this for your records.
- Receive Your Funds: Depending on your lender you can receive your funds as soon as the same day, or it may take up to 5 business days.
Whether you need to pay tax returns, or you just need more money, personal loans are a better option in the long run. They’re simple to access, offer more flexibility, and can have a positive impact on your credit score. Many lenders will also allow you pay off your loan early without penalty.
Where To Start If You Need Payday Loan Alternatives
If you’re in need of a cash advance, consider a Payday Loan Alternative like Spring. We offer personal loans up to $35,000. All you have to do is select how much you want to get started and let us take care of the rest.
Whether you have a good credit score or a low credit score, we can help. You can even pay off your loan early with no hidden fees in order to save on interest charges.
