Do you need a short term loan but are afraid to get scammed?
- Are you considering to borrow no credit check loans but worried about getting stuck in the payday loan cycle?
- Is your friend suggesting you not to take a loan?
All these doubts build up confusion in a newbie borrower’s mind, isn’t it?
But, what’s the reason behind it? That’s because you lack knowledge about no credit check loans in Canada. To your surprise, as it has been written here, payday loans actually have a positive impact on the economy.
Then why are people scared of borrowing one? It is because they are unaware of the payday loan legislation associated with it.
Yes, you read it right! Various provinces in Canada have legislation for protecting the borrowers.
If you want to find out more about it, keep on reading.
1. Understand the cost of payday loans
Generally, it is said that payday loans can get quite expensive due to their rate of interest. However, not many people are aware of the fact that the rate of interest varies from province to province.
In fact, there is legislation in Ontario that restricts payday loan lenders from charging a high rate of interest.
However, you should keep in mind that if you live in any other province of Canada, where the legislation is yet to be passed, the lenders can charge a high rate of interest.
2. Knowledge about payday loan legislation
All the provinces in Canada (except for Quebec and Newfoundland, New Brunswick and Labrador) recently passed payday loan legislation.
Therefore, it is important for you to thoroughly understand the following major issues concerning payday loans in your province.
- You can cancel your payday loan agreement within 2 business days.
- The maximum rate of interest that can be charged from you is 23% (some provinces have a maximum interest rate of @21%).
- ‘Rollover’ i.e. borrowing another payday loan without repaying the previous one (from the same lender) is illegal.
3. Repercussions on nonpayment of the loan
Another doubt that usually clouds the mind of borrowers is- what will happen if you couldn’t repay the loan on time? Its answer is that you may have to face the following repercussions:
- The lender can charge a fee on default of payment,
- Your total loan amount will keep on increasing as your interest will continue to accumulate,
- The lender can sell your loan to the collection agency that will also affect your credit score,
- Lastly, the lender can also sue you for nonpayment of the loan.
4. Rules for lenders
Now that you have understood about the legislation concerning no credit check loans in Canada, you should also get an insight into the various rules that your payday lender should adhere to:
- The lender should have a business license in their province.
- It is compulsory for the lender to disclose the information about the loan amount, the term of the loan, etc.
- Your lender has no right to contact any other person except for you for your loan related issues.
Lack of knowledge about topics related to finance can create hundreds of questions in the mind of the borrower.
Therefore, it is important that you do proper study about the laws and regulations, rights related to loans to protect yourself as well as to not get trapped by inaccurate information.