Le prêt sur salaire, c’est quoi?May 10, 2016

The Payday Loan, What Is It?

The payday loan is a way to borrow money in an emergency. Companies offering this service are generally not affiliated with banking institutions, but act as mediators. However, it is important to know that this kind of loan is often made at interest rates of over 60%. Here is how this type of loan operates, as well as some things to keep in mind before signing a loan contract.

What Exactly Is It?

The payday loan is a type of short-term loan that you pay back with your next paycheck (usually within two weeks). In most cases, you can borrow up to 30%, or even 50%, of your net salary (after taxes). This can be very useful in emergency situations, when you need cash immediately. However, when comparing this type of loan to others, the payday loan proves to be a rather expensive way to borrow money.

How Payday Loans Work

Usually, before granting a payday loan, the loan company will ask you to provide proof that you have:

  • a regular income;
  • a bank account;
  • a permanent address.

After providing these three items, you must sign your loan agreement. The contract stipulates the precise cost of the loan – including interest and fees – as well as  the date by which the loan must be repaid. We strongly recommend that you read this document carefully before signing it. When offering you a payday loan, some companies require that you give them a postdated check for the amount equivalent to the total sum of the loan, including all applicable fees, or that you sign a form authorizing them to withdraw that amount from your bank account on the due date of the loan – or, in other words, a pre-authorized debit. Finally, other companies advancing this type of loan require that you repay it in person.

A Few Things to Remember before Applying for a Payday Loan

Take time to reflect. Do you really need this money? Do you have other options to make ends meet until your next paycheck? And are you sure you will be able to repay your loan on time, with your next paycheck? If the answer is no, the payday loan will only worsen your situation.

If you regularly have trouble making ends meet, it may well be that you have a more serious problem. A payday loan will not solve that situation. In such a case, consider making an appointment with a credit counselling service. These agencies can help get you back on track.

On the other hand, if you just need money quickly to adjust to an unforeseen circumstance and you know you'll be able to repay it, our fast-cash-loan service will be much more economical than a payday loan. Guaranteed! 

Share this article