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.
So what other options do you have if you need a short-term loan?
If done properly, getting the right kind of loan with a responsible lender can get you closer to your financial goals. We’ll walk you through your two main quick options 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 a payday loan, 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 creditApply in 5 minutes, online or by phone.
You’ll need to understand this newer lending landscape, which can look quite complex, further delaying you in your search.
What if you need a Cash Advance 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 ding 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 from being denied a loan; a future lender may notice that, although you applied, there is no current loan from that same lender, and is 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.
There are many alternative lenders in Canada to help you with your financial situation; 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 what the important differences are and show that one is far better than the other.
Alternatives to Payday Loans
The Installment Loan
- This type of loan can also be short-term 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 instalments with which 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 the payday loan.
- This type of loan also imposes expensive fees for missed or late payments.
- The good news is although the interest rate is still usually higher than a traditional lender’s, your monthly payments (instalments) will not change, and that predictability allows you to set and keep to a new budget.
- In addition, paying back an instalment loan on time 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).
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 to your account on the same day, so you can spend it immediately on whatever you want.
Why do payday loans have such a bad reputation?
Often synonymous with “loan sharks”, payday lenders have gained a bad reputation because of the very high cost of borrowing. High interest and short-term repayment can create a cycle of “borrowing to repay”. Payday loans will tighten an already tight cash-flow (because of the added fees 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 money than they can actually afford to repay.
What is a payday loan?
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, which varies province to province.
How do 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.
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.
How Fresh Start instalment loans are better than payday loans
At Fresh Start, we believe personal loans should be simple, fast, and convenient; let us help you with your fresh start, with a Fresh Start 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: Fresh Start 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 $15,000: Fresh Start can approve loans from $500 - $1500, all the way up to $15,000.
- Customer Service: Fresh Start 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 a payday loan alternative?
If you’re in need of a cash advance, consider a Payday Loan Alternative like Fresh Start. We offer personal loans up to $15,000. All you have to do is select how much you want to get started and let us take care of the rest.