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How Payday Loans Differ from Other Loans

It’s important to understand the difference between a payday loan, also known as a short-term loan, and a traditional loan before you decide to apply for one.

Traditional Loans

Traditional bank-issued loans are usually for somewhat substantial amounts of money and are often used for a mortgage, car or personal loan. The bank profits from your interest payments over a long period of time. Because the bank is taking a risk in lending such a large amount of money, it usually wants the borrower to have decent, to good credit. It can be difficult to get this type of loan if your credit history is over-extended, bad or non-existent. Traditional bank loans also take more time for approval and disbursement of funds due to underwriting processes.

Canada Payday Loan Terms

The biggest difference between a payday loan in Canada and a traditional loan lies in the small dollar amount, rate and term. A payday loan is a smaller dollar amount and for a shorter period of time, typically a month or less (due on your next pay date). Canada payday loans are designed to be a convenient resource to get you money in a pinch. The rate is higher than a traditional loan to represent the higher lending risk to loan quick cash, often without checking credit scores. This is similar to how the insurance industry increases rates due to a ticket or accident - they are taking on additional risk, so they can charge more

In Canada, the rate amount a lender can charge is decided on a province-by-province basis. That means if you’re getting a payday loan in Manitoba, for instance, you’ll have different terms and a different interest rate than someone who got a payday loan in Alberta. Regardless of the province, you need to pay the loan in full when it comes due.

When Should You Apply for a Payday Loan?

The unexpected happens; good and bad. Everyone needs extra cash at some point for surprise medical bills, car or home repairs or unexpected life events.

Life surprises never follow a schedule. If you just paid all your bills and your bank account is running low, and suddenly find yourself in need of cash urgently, you might consider applying for a payday loan. Most loan companies can provide the funds you qualify for the next day. In fact, 310-LOAN can get your the cash you need within 30 minutes of approval.

If your personal loan options are limited , a payday loan can bring much needed stress relief. Once you make the decision to apply for a payday loan, just keep in mind that you will need to pay it back with your very next paycheck.

Our Advice on Applying a Payday Loan in Canada

  1. Know how you’ll pay the loan back
  2. Only borrow exactly what you need
  3. Read the fine print
  4. Understand the consequences of not paying the loan back on time
  5. Use this loan once you've considered alternatives

We’re here to help you out when you need us, and we want you to make an informed decision as to whether payday loans are the right fit for you.

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