Payday Loans 101

A payday loan provides immediate funds for those with unexpected financial need. The purpose of this type of loan is the immediate access to cash but should be paid back on your next payday. There are higher costs associated with borrowing a payday loan so it is recommended to only borrow what you need and what you can afford to pay back. A few things to consider before taking out a payday loan are the following: * Before taking a payday loan, consider other, cheaper options, such as overdraft protection on a bank account, an advance on a credit card or a personal line of credit with a financial institution. * There are a lot of costs involved in payday loans, including high interest rates. Some of these costs can be hard to understand. Ask what additional costs may be charged if you don't pay the loan off on time. The new Ontario Act requires that all charges you're required to pay are included in the total cost of borrowing. * Don't borrow more than you need. If you must borrow, only borrow an amount you're 100 per cent sure you can repay on the due date. Don't agree to have your employer sign over all of your wages to the payday lender if you're unable to repay what you owe. In many provinces, this is illegal. * Get a copy of the loan agreement and take it home, read and understand it before signing. Don't feel pressured into signing before you read and understand the loan agreement. Under the new Ontario Act, you now have a cooling-off period during which you can change your mind. Don't use your personal property, such as a car, as a guarantee for a loan.