Canadian personal loans are in many ways similar to those in the US. There are still some major differences though. These are brought about by the usury laws that are in place to protect the borrowers. They are the kind of laws that are absent in many of the states in the U.S.
Payday Lending in Canada
Provinces in Canada are allowed to regulate short term lending within their own jurisdiction. Perhaps the most comprehensive laws are those found in British Columbia. Here are just some of the features of the regulations concerning quick online loans.
- A cap of 23% is placed on charges in regard to all the fees and interest.
- The borrower can cancel the contract a day after the agreement was signed.
- A limit has been placed on the number of payday loans that can be taken out by the borrower.
- The lenders’ ability to access bank accounts of their customers is seriously restricted.
Those are some of the regulations that are not present in the United States except for a few places. This lack of regulation is what has led to numerous abuses by many lenders offering payday loans with no credit check to high risk borrowers.
High Rates of Interest
The government in Canada has responded to the complaints against payday loans with extremely high interest charged by many online lenders. This is something that many state governments in the U.S. have not done yet. Direct lenders claim that they have every right to charge it because of the risk that they take by lending cash to borrowers who have very bad credit. The chances of defaulting seem very real.
The Reality of The Situation
The reality is that a default rate on quick online loans is not much higher than that on other types of loans which is definitely not enough to justify the mind boggling rates that companies are charging. Yet they get away with it because there are no regulations and laws saying what they are not allowed to do. They are just allowed to charge as they see fit.
Borrowers with No Choices
It is sad that most of the borrowers who have applied for quick online loans do not have much choice. They have low incomes along with bad credit which means they have a small chance of using other financial products. They have very limited resources or else they would not be desperate enough to use a quick personal loan to take care of their cash shortage.
This means that when payment time comes, borrowers are not much better off when they applied for the loan. What’s the easiest solution that they could use? Take out another payday loan, which can be a start of a vicious cycle without any regulations limiting the number of times that a person can borrow. You should seriously consider your options first before turning to payday loans with no credit check in Canada or any other country.