7 Tips for Applying for Online Loans with Bad Credit

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Personal Finance

Personal Finance

You need cash. Unfortunately, you’ve made some financial mistakes in the past and now your credit score isn’t so hot. While having bad credit can certainly make it more challenging to borrow money from your traditional bank or credit union, there are options available for personal loans in Canada despite your credit history.

If you’re in need of money to help cover a small project, solve a financial emergency, or cover the bills on a short month at work, online loans in Ontario are available. Best of all, you won’t have to fill out a giant stack of paperwork or even leave the house to apply. Applying for personal loans for bad credit is far easier than you think, and far faster, too. Taking out a new online loan in Toronto can be started in just a few minutes online. 

Understand how personal loans work

Your first step in applying for a personal loan is to simply understand what the loan can offer you and how the loan itself will work. When you take out money through a personal loan, the funds will be delivered once your application is approved. 

You apply, the online lender considers your application, and once you satisfy if the lender’s criteria, you are offered the loan terms for your approval. You approve the loan terms if they are satisfactory and then you wait for the bank to fund your loan and deposit the money directly into your bank account. Once the funds have arrived, they are yours to spend in any fashion. The bank will typically use automatic withdrawals from your bank account to repay the loan. 

Find an online lender to match your qualifications

If you know that your bad credit is going to cause problems with traditional lenders, don’t waste your time applying for online loans that aren’t a good fit. Instead, focus your efforts on finding the lenders who are comfortable lending money to those who don’t have great FICO scores.

Often you can find an online lender for bad credit by simply reading the requirements on their website or looking through the list of materials that is required for the loan. Payday loans and bad credit personal loans typically consider only income when you apply, not credit scores, which makes those loans a great fit for you if you have a steady job and a willingness to repay the money you’re borrowing. In fact, the use of payday loans has doubled in Canada over the last several years. 

Find the necessary items before you apply

Once you find a loan that seems to match your qualifications, your next step is to prepare for the application. Don’t start the application before you have a chance to find what you need. Typically, an online loan application will require:

  • Your bank statements
  • Your pay stubs
  • Your account numbers
  • Your Canadian identification
  • Your personal phone number, address, and contact information

Gather these items together and have them on hand when you apply for the loan. In some cases, the lender may request additional documentation to support your loan, especially if you are applying without using your credit score. This documentation might include tax statements or other financial documents to show your steady income and your ability to repay the amount that the lender is allowing you to borrow.

In other cases, you may be able to apply, fill it the necessary information from your documents, and see an approval in a matter of minutes. Every application is unique.

Check the terms of your loan carefully

Once you have applied for a new loan and the lender has approved your application, you’ll be offered terms. These terms are the monthly repayment amounts and the interest rate, or APR, of your loan. The lender will assign your loan an interest rate based on the risk the bank feels they are taking with your application. 

You’ll also be given a number of payments and the corresponding amount for repayment. Be sure that you agree to the terms and that the numbers make sense for your financial situation. If you accept the terms of the loan and accept what is offered, you are locked into the loan and will be expected to make the payments, even if the amount is uncomfortably high every month. 

Look for guaranteed approval 

Some online lenders offer borrowers guaranteed approval or preapproved offers. These loans are targeted at borrowers with a certain credit score or perhaps a certain income if credit score isn’t considered for the loan.

With a preapproved offer, you can apply for the loan with confidence. You already know you should be set for borrowing, and most preapproved offers have more favorable terms as the borrower is considered less risk for the online lender. 

Improving your credit score can improve your loan terms

If you can improve your credit score in the short term, you will see benefits when you apply for personal loans. A higher credit score means more guaranteed approval offers and better terms on personal loans. Your interest rate will likely decrease and that will reduce the amount of the monthly payments. It will cost less to borrow money.

It’s not always possible to improve a credit score in a short term, but in some cases, you can make quick improvements by checking your report for mistakes and reporting issues to have them resolved. If improving your loan in the short term isn’t likely, you can still look forward to better terms on future loans as your score improves.

Many personal loans are reported to the credit bureaus

While your bad credit might be frustrating for you now as you apply for loans, the bad credit personal loan you’re getting today will help improve your credit for the future. When you borrow money, the loan repayment is often reported back to the credit bureaus, helping to establish a pattern of good payments and decreasing debt.

Installment payments on personal loans make it easy to repay the full amount, diminishing the total amount you’ve borrowed significantly every month, and giving your credit score a bit of boost with each on-time payment as well. 

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What to Know About Payday Loans?

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Personal Finance

What to Know About Payday Loans

Many Canadians know when they need fast cash, they can rely on payday loans to help them make ends meet until their next cheque. When you need funds fast and have tried other options, payday loans are always available, but it is advised that they are only used as a last resort because of the high interest rates. While they can provide you with temporary relief, you should know what you’re getting into when you choose to use a payday loan. 

One of the biggest challenges that some face is when they are in desperate need of cash, they might be willing to agree to anything. Some lenders that are less scrupulous know this and try to take advantage of a borrower’s predicament. Which is why you need to read before you sign, but more on this below.

Are Payday Loans a Good Idea?

For many, definitely not. But for others, yes. There are some people that do not have options like banks or credit unions to go to. They don’t have an emergency fund, and when unexpected expenses come up, their options are limited. While it is probably best to fo with another option, but if you don’t have any, payday loans can provide a short term solution. 

Fast Cash from e-Transfer Loans

One of the fastest ways to get cash from an online payday loan is when they provide an e-transfer. If your loan request is approved, the funds can arrive in your account quickly.

Even with bad credit or low income e-transfer payday loans can be an option available to many when you need fast cash. If you’re employed, 18 or older with an active checking account, you can apply for a fast payday loan 24/7 online. With near instant approval, the entire process is quick and easy in Canada.

Finding a Guaranteed Payday

Sometimes people that are looking for loans online will come across all kinds of things that can sound too good to be true. This can be when some lenders will say just about anything and everything to attract your business. 

One example is guaranteed payday loans no matter what canada that some people will look for when in need of fast cash and hoping that some kind of guaranteed approval exists. 

What About Payday Loan Alternatives?

A payday loan is really for people that have poor or bad credit and can’t get a loan through the banks or credit unions because of this. They are simply considered too much risk by the banks, and they’re not willing to let some borrow. 

But if your overall risk doesn’t look to be too bad, sometimes online lenders will offer you what is called an installment loan, which is very similar to a personal loan. While these are also high interest, they’re a better option than payday loans, which are due in full on your next payday. With installment loans, you are provided the opportunity to make multiple payments. This can also be a lot easier on your budget than repaying a lump sum all at once. 

Smart Borrowing

While payday loans are a high interest short term loan, when used responsibly they can be a great option when alternatives like asking friends or family for financial help or pawning something is not a quick cash option. Of course trying the bank or credit union would be advised, or even a cash advance from a card. But it’s assumed these would have been used if they were in fact options. 

As always, smart borrowing also means to read the terms of your loan agreement before signing as well, so that you know what your payments will be, when they occur, and other important details and conditions about your loan. Without reading ahead of time, you can later learn the hard way of things like additional fees, or even penalties within your loan agreement. It’s strongly advised that you take the time to read through it before signing and be aware of any and all particulars that you would be agreeing to. 

You should also only borrow what you will be capable of paying back on your next payday. Otherwise, what happens to many is they find that they need to take out another loan to pay off the first, and it becomes a debt cycle that can be expensive. 

Smart Saving

While some studies say as many as half of Canadians could not cover an unexpected expense of $400, one thing you can do starting now is to put $10-20 away each check, to build up an emergency savings. Obviously, the more you put aside the sooner you might get to the point where you have saved something substantial. You might consider what you could do without temporarily, like a subscription service or something, to help you reach your goals faster. Who know, your future self might just thank you should an emergency happen later where you could use fast funds again.

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Payday Loans Laws and Regulations in Canada

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Payday Loans Laws and Regulations in Canada

Payday Loans Laws and Regulations in Canada

Payday loans are becoming popular since they appeared in Canada in 1990s. In order to clearly understand all the risks and the money involved, you should be familiar with certain rules that provide important information necessary to make a reasonable decision.

Background

Statistics suggest that the average payday loan is valued at $280 and is extended for a period of 10 days. In order to meet the basic loan qualification, the borrower must have identification, a checking account and a proof of a regular income. As a rule, lenders extend the credit based on the percentage of the borrower’s net pay until his next payday. The borrower writes a post-dated check for principle plus interest rate and fees.

Canadian Payday Loan Association

The CPLA represents 804 retail financial services outlets providing payday loans to customers in Canada. The association’s mandate is to work with governments toward a national regulatory framework that will allow for a viable industry and protect consumers. The payday loan industry is regulated on the basis of the Pay Day Loans Acts and Regulations, which operate in each province and under the appropriate governments.

Provincial regulation

Since 2006, the Criminal Code of Canada allowed Provinces to regulate the payday loan policy and each of them, except Quebec and Newfoundland, has enacted certain rules towards this industry. Since November 1, 2009 the Payday Loan Regulation under the Business Practices and Consumer Protection Act, have been in force in British Columbia. The maximum interest rate was 23% of the principal. All lenders are required to register and are actually regulated under the Consumer Protection BC. The government of Saskatchewan announced the regulations similar to those in British Columbia in June 2010. The Payday Loans Act 2012 came into effect on January 1, 2012. In Manitoba, the maximum rate you can be charged is 17%, according to The Consumer Protection Regulation 2006. Ontario limited the fees till 21% and enacted the Payday Loans Act 2008. In 2008, New Brunswick laid out a regulatory framework for licensing payday lenders but hasn’t yet determined the maximum interest rates. Prince Edward Island and Nova Scotia have imposed a cap of 25% according to the Payday Loans Act 2009.

Criminal interest rate

Section 347 of the Criminal Code of Canada makes it a criminal offence to charge more than 60% interest annum. Bill C-26 amends section 347 of the Criminal Code, which criminalizes the charging of usurious interest rates. An increasing number of payday loan companies suggests that some Canadians are willing to pay these rates in excess of those permitted in the Criminal Code. Bill C-26 is designed to exempt such loans from criminal sanctions in order to facilitate the provincial regulation of this industry. Thus, it applies to lending companies licensed by any province that has legislative measures in place designed to protect consumers and limit the total cost of the loans. The new section 347.1, which exempts a person who makes a payday loan from criminal prosecution in case – the loan is for $1500 or less and the agreement lasts for 62 days or less; if the person is licensed by the province to enter into the agreement and the province has been designated by the Governor in Council under new section.

The main requirements on the payday loans in Canada according to the Payday Loans Act in each province that each should know about

  • All loan providers have to be licensed.
  • The lenders have to give you a copy of all necessary documents you have signed and the loan agreement.
  • The loan agreements must disclose all necessary information according to the Act and Regulation.
  • A lender has no right to issue a new loan until the first one is repaid, and must not issue a loan greater than 50% of the borrower’s income (this percentage may vary regarding the province).
  • The lending company has no right to access the borrower’s bank account.

References

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