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 5 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 on PEI, 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 on PEI.
List of licensed payday lenders
The following companies are licensed payday lenders in the province of Prince Edward Island:
- Cash 4 You
- Iceberg Finance
- Money Mart
This list may change so it’s best to always check with the Department of Justice and Public Safety 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 PEI. It’s important to note that these rights can only be protected when you use a licensed payday lender in PEI. Here are the regulations that licensed payday lenders must adhere to:
- Payday lenders can only charge a maximum of $25 for every $100 borrowed, over any term under two months. This means that on a $600 loan, the maximum interest they can charge is $150, pending you pay it back on time.
- Payday loans cannot exceed $1,500 and the term cannot exceed 62 days.
- For a typical loan extended over a two-week pay period, payday lenders can charge an interest rate of 1.79% interest per day. Over 365 days, that equates to an annual interest rate of 652 per cent, the highest in the country.
- Lenders must give you a copy of your loan agreement which will include the total cost of borrowing and other required information at the time of signing the agreement. The right to cancel “Two day Cooling Off Period” must be clearly and prominently disclosed on the agreement.
- You have the right to cancel the loan within two business days of entering into it. You do not have to give a reason for cancelling the agreement and you are not allowed to be forced to pay a cancellation fee or penalty. If you have made any payments under the loan, the lender must return those payments to you at the earliest reasonable opportunity.
- You may cancel the agreement at any time if you are not provided with the loan or if the agreement does not comply with the Payday Loan Act.
- If you cancel the agreement, the lender must refund all payments, return all post-dated cheques or pre-authorize debits and destroy any pre-authorizations. You must pay back any advance and return any goods received from the lender under the agreement.
- You can pay the balance ahead of time without any penalty fee.
- A lender cannot enter another agreement with you (grant a rollover loan) unless you have proof that at least 7 days have passed since the full balance was paid on the first agreement
- There is no cost to borrow a payday loan if:
- a lender or broker is not licensed at the time of the agreement
- a lender does not give you a copy of the agreement at the time of signing
- a broker requests payment for assisting you
- a lender demands the cost of borrowing before the end of the term of the agreement
- 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.
If you think you might be the victim of an unlicensed payday lender, read this blog post or contact us for a free consultation.
For more information on payday loans in Prince Edward Island, visit the government website.