As with anything that can affect financial status, a little education goes a long way. With secular society operating on the premise that money makes the world go round, or at least where the consumerist society is concerned, knowledge on its wise acquisition and disposal is essential. Since there are many topics regarding money, let us confine this article to payday loans in Canada.
Interests and Fees Applied
In Canada, usurious and criminal interest rate is defined as fees and charges on the principal loan that exceeds 60% yearly. This definition includes processing fees and deferral fees on payday loans in Canada. For example, a payday loan company can charge $30 as interest for every $100 borrowed, a processing fee of $10, and a deferral fee of $25. When taken as a whole, these charges will exceed 60 per cent annually.
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Before you even think about borrowing against your next paycheck, remember this interesting trivia. You are at a borrowing disadvantage if you are being charged criminal interest rates. If it is possible to borrow from relatives and friends, you should do so. However, this might not be possible all the time as even they can be clients of companies specializing in payday loans in Canada!
Jurisdiction over Loans
Companies offering payday loans in Canada remain largely unregulated. The federal government and the territorial government share responsibilities for the industry's regulation, which often leads to conflicting decisions. The former regulates interest rates, while the latter polices payday loan companies' daily operations and approves licenses.
With this separation of responsibilities, each state within Canada will have separate regulations on payday loans. As such, it is recommended that you apply for a loan with a company operating in your state; or if you must borrow from another state, at least know the policies there. You do not want to be unpleasantly surprised if you encounter problems brought about by wrong assumptions.
Complaints, Concerns
As with any budding industry, companies offering payday loans in Canada receive their fair share of complaints. It is essential that you know what you are going into before plunging into debt. Complaints usually include unfair collection practices, unsatisfactory client service, high fees and interests, insufficient disclosure, lack of written documentation, and privacy concerns.
The primary concern about payday loans in Canada seems to center around the usurious interest rates. There are allegations of predatory practices since the credit companies appear to prey on those who are desperate for quick and easy loans - those with bad credit, no bank accounts, low-income individuals, and those in emergency situations.
On the other hand, payday loan companies defend these interest rates as necessary measures meant to protect them from bad debtors. After all, their clients can have a history of bad debts and yet they continue to loan them the money.
With this information, a prospective borrower should weigh the pros and cons of availing of this alternative credit facility. It is quick and easy, yes, but it does have its share of problems. Then again, all loans have their share of problems. Ultimately, borrowing against what you still do not have remains your choice.
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