payday loan

[annof]

What exactly is a payday loan? How does it work? Why would you get a payday loan rather than personal loan?

[trent]

A payday loan is short-term loan that the borrower must repay upon receiving his next paycheck. Many Canadian companies offer payday loans including MoneyMart, The Cash Store, TGI Payday Inc, and MogoMoney. The loans are usually for small amounts like $300 or $500.

Payday loans are a last resort borrowing source, because their interest rates and fees are outrageously high. You’ll be better off getting any other kind of loan if you can.

[annof]

Thanks for the info. I wouldn't take a payday loan, I just wanted to know the difference.

[Canadian]

There is a big difference between payday loans and normal personal loans. Many consider payday loans to be a predatory lending, because of their high fees. Still there are some borrowers who would never qualify for anything close to a personal loan usually due to bad credit problems. For such borrowers payday loans are about the only option and the high interest rate and fees charged by payday lenders are simply compensating for the risk of lending money to somebody with credit problems.