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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 your 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.
Other Options For Short-Term Loans
If done properly, getting the right kind of loans with responsible lenders can be a financial decision that gets you closer to your financial goals. We’ll walk you through your two main quick options for financial decisions and show you which one’s better.
An abundance of lenders are out there these days for short-term loans and payday loans. Traditional banks and credit unions are still there, but they can take a long time and require that you go in for an appointment.
Installment loans are just as easy to get as payday loans, but since they have lower interest and you can take longer to pay them back, they are a far better option than payday loans... Even if you have bad credit
Apply in 5 minutes, online or by phone.
You’ll need to understand this newer lending landscape, which can look quite complex and further delay your search.
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. There’s a potentially negative effect of being denied a loan; a future lender may notice that, although you applied, there is no current loan from that same lender, and you are likely to wonder why.
You can try to increase your credit card limits or use cash advances from your credit cards, which have a higher interest rate, and interest charges accrue faster than purchases, but there are other options. If you speak to your bank, you may even be able to get overdraft protection, which some banks refer to as a line of credit. It can be more difficult to get this with a poor credit score, but it just depends on your bank.
There are many alternative lenders in Canada to help you with your financial situation, including lenders who recognize and fill the gaps traditional lenders create. They offer two basic loan types; one is a payday loan, while the other is an instalment loan. We’ll explain the important differences and show that one is far better than the other.
Best Alternatives to Payday Loans
The Installment Loan
- This type of loan can also be a short-term way of borrowing money but 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 it 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 instalment 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.
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 of 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 60% annually. 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 up loans for 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 because of the very high cost of borrowing since when you pay interest, it’s a large amount. 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.
Coupled with the fact that not all lenders lend responsibly, 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 why 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, and a post-dated cheque or withdrawal authorization to repay the loan on your next pay date. 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, who need more than just a few bucks that they could borrow from a friend, and who 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 and, 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 or a traditional bank or 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 with a 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 scores. 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!
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.
