There is definitely a need for online payday loans in Canada
to help those Canadians who experience a short term financial emergency. Every year in Canada, over 2 million people take out short-term unsecured payday loans in amounts between $100 to $1,500. There are 1400 companies across Canada that provide this service which can also be accessed online.
Payday loan companies made their first appearance in Canada during the 1990s decade when a need was seen for short-term lending of small amounts of money. Employees were no longer able to request advances on their salaries because the payroll function at many companies was outsourced. Banks and finance companies had little interest in providing these small loan amounts so the market niche was filled by the emerging payday loan companies.
Only people who can present personal identification, proof of a personal checking account and proof of employment such as a pay stub can obtain the services of a payday loan company. According to the Canadian Payday Loan Association or CPLA, women make up 53% of the applicants while men are 47%. Most fall in the category of having an average income. According to the CPLA, these are often people who are well educated about the costs of these loans but they want the convenience of having the loan available when they need it.
These loans are often used to cover an unexpected emergency such as a visit to a dentist for a toothache. Payday loans are not meant to be a long-term solution to a tight budget. Regulations in Canada prohibit the loan company from rolling the debt over from month to month. When a person borrows from a payday loan company, they provide a check to the company that will pay off the loan in full on the next payday.
Government Legislation and Business Guidelines
In Canada, companies providing payday loans fall under federal legislation with additional regulations provided in eight of the provinces. In addition to government legislation, the CPLA which includes about 50% of the payday loan companies in Canada has created a Code of Best Business Practices. The members are also encouraged by the CPLA to offer credit counseling information to consumers who are having problems in meeting their financial obligations. Canadian consumer protection organizations have viewed this approach to payday loans as a necessary step in dealing with people who are having difficulties dealing with a financial emergency when they already have a lot of personal debt.