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It’s true that payday loans have had a bad rap in the past. No news there. But what you might not know is how the industry has changed. In fact, the payday loan industry has been revamped over the past few years following intense scrutiny over high-interest rates and excessive charges. Consumers are now protected with new legislation and have the added convenience of being able to apply online.

Payday Loan Legislation in Canada

New provincial legislation was introduced with the goal of protecting Canadian consumers. Ontario, for example, passed the Payday Loans Act, which requires loan companies to be licensed, and gives consumers a two-day “cooling off period” allowing them to back out of a payday loan agreement without penalty. The legislation also capped the “total cost of borrowing” at $21 per $100 of loan, making them comparable to the interest charges you incur carrying debt on a credit card.

Getting a Payday Loan Online

Since the first few outlets started appearing in Canada in the 1990s, there are now more than 1,300 across the country. Today, the real growth is happening online where the process of applying for a payday loan is even quicker and more efficient. This makes online payday loans specifically a great loan alternative if you need an emergency boost of cash straight to your bank account (but be warned, this can be a bad thing if you don’t know how to manage debt properly).

Payday Loans vs. Banks: What’s the Difference?

Banks and payday loan providers differ in many ways, so don’t get confused between the two. Yes, you can cash your cheque there, but that’s where the similarities end. Unlike depositing in a traditional bank, where you’ll receive a little interest (emphasis on “a little”), the transactions at payday loan operations are loans in advance of you receiving your cheque, so be warned that the interest can add up.

Qualifying for a Payday Loan

It’s not just a matter of walking in the door – or registering online – then walking out with cash. You need to qualify first. Some, like the self-employed or people on government assistance, are ineligible for payday loans. Each company can have its own standards for applicants, however, they generally require that you: a) Have a job that you’ve been at for at least three months b) have a chequing account at another financial institution c) meet a minimum monthly income level and d) have a phone number you can be contacted at. Once you’ve qualified, the loan amount you’ve requested will be deposited into your bank account within 24 hours (though often within an hour or two). On payday, the loan and interest amount are automatically withdrawn from the same account. And it’s that speedy, no-hassle access to cash that the payday loan companies are, well, banking on.

When Payday Loans are a Good Idea

“There are many people who have maxed out their credit card, or can’t get credit, and may have no money in the bank between cheques, that have urgent needs for funds – a car problem, a utility bill, whatever,” says Scott May, director of “They can pay that bill and avoid late payment charges and they won’t incur any overdraft or NSF charges, that can be many times more than the loan amount.” The Canadian Payday Loan Association stresses that their 600-plus members provide a service that is intended as a “short-term loan to meet unexpected cash needs” and point out that it is “inappropriate to use for long-term or continuing cash needs,” adding that “if you find yourself using payday loans on a frequent basis, you should consider using other sources of financing, or consulting a non-profit credit counsellor.” The fact that many provinces are now regulating the payday loan industry is a step in the right direction. Just make sure that any loan you take out is done for the right reasons and includes a plan to pay it back.

Allan Britnell

Toronto-based freelancer Allan Britnell is an award-winning writer with nearly 20 years’ experience. He covers a diverse range of topics, including DIY and professional home renovation projects, nature and the environment, small business, personal finance, and family and health issues. He is also the managing editor of Renovation Contractor, the publication written for small- and medium-sized contracting and custom home building companies. He lives in Toronto with his wife, two daughters, and their dog, Oscar.

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