What is a Payday Loan?

What is a Payday Loan?

When you have bad credit, life can get pretty hard. It can be difficult to get loans and you may start paying higher interest rates on your credit cards. You might even get turned down for an apartment or be forced to put down a security deposit on utilities.

So when you need money and you have bad credit, what can you do? For some, payday loans could be the answer.

First things first

You might not even be sure if you have bad credit. What constitutes “bad credit”? In Canada, financial institutions use a three digit number to assess credit scores. These scores are supposed to reveal how trustworthy a person is as a loan risk.

Any credit score under 660 could be a concern, and anything under 560 is considered poor. Your credit score goes down if you are late making a payment, if you are carrying a high amount of debt relative to your income, or if you have debt that has been sitting on your account for a long time.

How do you get bad credit?

The problem is that many people have poor credit scores even though they are financially responsible. Some people have only one credit card because they don’t want to carry a lot of debt; yet utilizing most of that credit means you can appear to have more debt than you really do.

Other people have incorrect information on their credit reports, but since most people don’t check their credit reports regularly, it’s easy for these mistakes to go unnoticed. Sometimes people simply get behind on payments. Whatever your reason for having a low credit score, a payday loan could be the way to fix your problem. Which brings us back to the question: what exactly is a payday loan?

What is a payday loan?

A payday loan is a short-term loan, often for around $500 or so. The loan has to be paid off between three and six months later, but good payday lenders will let you repay earlier if you want to avoid interest payments. Payday lenders charge higher interests than banks, but they also take on greater risks and are willing to make loans to people with lower credit.

Unlike bank loans, which are usually paid back in installments, you can sometimes pay back a payday loan all at one time or in installments as you prefer. You can repay by cash, check, or pre-loaded debit card. Some lenders also let you rollover your loan once it comes due.

What are the requirements to get a loan?

When you get a loan from a reputable company like Eastern Loans, you need to be steadily employed for three months or more, be a Canadian citizen, earn a minimum of $1200 a month, and be over the age of 18.

You will also need to have an active bank account with a Canadian bank or credit union. In most cases, you won’t be able to get a loan against welfare payments, insurance income, disability payments, or other income that’s unrelated to your job.

Why get a payday loan?

Payday loans may be the answer when you have some kind of emergency expense that drains you of all your ready cash, such as a car repair bill or a medical emergency. It’s also a good way to get money quickly in order to help out a friend or family member who might need financial help.

Some people get payday loans because they aren’t eligible for bank loans due to their poor credit — which, in many cases, may not be their fault. Instead of wasting time, effort, and even money trying to convince a bank to loan you money, you could get approved for a payday loans in just a few short minutes.

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