Payday lending regulations in Canada
Most of us start to get nervous when our wallets are empty and there is some sudden crisis knocking on our door. This can be the smallest of thing like a broken car or a high utility bill, or it can be as massive as a sudden medical emergency or equipment breakdown. It is very unfortunate for us to live in these times where we have a limited money supply from our respective jobs and a very high cash outflow even on the bare necessities. The banks do not fund us money basis the gravity of situation and take their sweet time to do multiple checks and do not think twice before rejecting and throwing our application in the bin. The norms for credit checks also have been becoming strict on a daily basis and all such factors combined make sure that a needy applicant do not get sufficient money when the need is at its peak.
In such a disastrous situation, the only feasible way for most of the people is to look towards payday or cash advance loan. Payday loans provide instant cash at the click of a mouse and the money gets credited in the bank account by the same or very next day. The additional ease is provided by not diving deep into the credit history of the applicant thus an average individual with a not so good history can also get a loan on the same terms. This process is very easy and user friendly and hence the acceptance for this product is very high amongst the people.
The lending company usually evaluates the loan application by confirming the income source of the applicant. Having a regular job with a minimum monthly take home income above $1000 is a must. The quantum of approved loan amount depends on this salary and other policy factors of the lender. Usually such companies offer the loan amount in the range of $300 – $1000 after taking into account all such considerations. Once the customer has paid back the first loan successfully on time, they are entitled to borrow a higher sum next time.
Using payday loan is the best option for people who do not have any other borrowing options. The turnaround time and no requirement of collateral makes it a popular choice. Considering all its benefits and ease of money, the loan comes with a cost. The rate of interest on these loans is higher than the standard loans from the banks etc. A standard agreement requires the full payment of the loan amount by the next pay cycle date through a postdated check or a debit mandate.
Payday loans in Canada is regulated under the Canada Credit Code by the Canada Department of Finance. The regulator insists on the borrower knowing the product, their rights and options before finalizing such product. Generally the interest rate is on an average $20 per $100 borrowed for 14 days making the annual percentage rate or APR over 500%. In the situation where the borrowers are unable to pay off, it is important for them to contact their lenders before defaulting. As a support from regulation, each lender is required to provide a no cost 60 days extended payments plan once in a year. Under this the option of 4 equal installment is provided by the lender in 60 days. In case of further assistance, the borrowers can take the help from various debt counselors to take help in managing their debts. These counselors are licensed by the Idaho Department of Finance.
The lenders in Idaho are also required to comply with rules as per regulations given in Federal truth in Lending Act. This makes him to follow guidelines like not to lend more than 25% of the gross income of the applicant with an upper cap of $1000. Similarly they are required to put up the exact cost of borrowing as a notice for each $100 amount taken. This loan cannot be closed by the means of granting any other loan. Similarly in case of a default, the lender cannot make present the check more than 2 times into the bank account of the borrower.