Payday loans are short-term loans usually up to $1,500 that can help individuals get through a rough spot. They are called payday loans because typically, they are paid back on the next pay day. Oftentimes, people use these types of loans to pay for things if they run out of money before their next paycheck.
Payday loans can be expensive, so they’re best to be avoided if possible. Check out five payday loan alternatives and see if any of these might be a fit for you.
If you must use a payday lender, be sure to use a licensed one. With the rise of Internet usage, several new payday loan companies are popping up online, and the majority of them aren’t regulated.
If you’re looking for a payday loan in Newfoundland and Labrador, be sure you know your rights ahead of time. The government has rules in place to protect you when dealing with paying back a payday loan.
Unfortunately, these rules are only able to be enforced if you’re dealing with a licensed payday lender, so it’s important to ensure that any lender you’re using is licensed in Newfoundland.
List of licensed payday lenders
The following companies are licensed payday lenders in Newfoundland and Labrador
- Money Mart
- Cash 4 You
- Iceberg Finance
This list may change so it’s best to always check with the Consumer Affairs Division of the Newfoundland government for a list of licensed payday loan companies. Any company not on this list should be avoided completely.
Know your rights
Know your rights before taking out a payday loan in Newfoundland. It’s important to note that these rights can only be protected when you use a licensed payday lender in Newfoundland. Here are the regulations that licensed payday lenders must adhere to:
- Payday lenders can only charge a maximum of $21 for every $100 borrowed, as long as you pay back the loan on time. For example, if you borrow $600, the maximum interest you can legally be charged is $126.
- When a borrower fails to repay the loan as per the agreement, the payday lender may charge an interest rate of 2.5% per month, not to be compounded, and a one-time fee of $20 for each dishonoured cheque or dishonoured pre-authorized debit.
- Payday loans cannot exceed more than 50% of a borrower’s after-tax pay.
- Payday lenders may not issue multiple loans to one borrower. It is prohibited to grant rollovers – a second payday loan to pay out an original payday loan which you can’t pay, or an extension or renewal of your payday loan that adds extra fees or charges, other than interest.
- Lenders cannot request payment from you before it is due under the agreement.
- A payday lender cannot ask for collateral against the loan in the form of property, nor can they request that a borrower insure a payday loan.
- Lenders cannot accept undated cheques nor can they ask for a post-dated cheque, pre-authorized debit or future payment of a similar nature for an amount exceeding the amount to repay the payday loan by the due date.
- Lenders cannot require information that would give them direct access to a borrower’s bank account, except for pre-authorization for repayment of a specific payday loan. They cannot make unauthorized withdrawals from your bank account.
- Lenders cannot make phone calls to collect debt outside of the hours of 8am and 9pm. They are also prohibited from harassing the borrower, a member of the borrower’s household, a relative of the borrower, the borrower’s employer or a neighbour, friend or acquaintance of the borrower. Harassment includes the use of threatening or intimidating language, profanities, or the use of excessive or undue pressure to pay.
- Lenders may not give a person false, misleading or deceptive information, such as referencing police, a law firm, prison, credit history, court proceedings, a lien or garnishment during collection practices.
- Lenders cannot contact a borrower’s spouse, cohabiting partner, relative, neighbour, friend or acquaintance other than to obtain the borrower’s residential address, personal telephone number or employment telephone number.
- Lenders cannot contact the borrower’s employer other than to confirm the borrower’s employment status, business title, the address of the business or the date of the next payday.
- If you request that the lender not contact you at work, then the lender is forbidden from contacting you at your place of employment.
- Lenders cannot communicate information about your payday loan to anyone other than you, the borrower, unless given explicit consent.
- Lenders cannot enter into or arrange wage assignments with a borrower or the employer of a borrower, nor can they publish or threaten to publish a borrower’s failure to pay a loan.
- If a payday lender does not follow these regulations, they are likely not licensed. If a lender is not licensed, you do not have to pay any interest.