While banking technology is always evolving to be more inclusive, a surprising number of people still can’t qualify for a basic bank account. In fact, according to a study done by ACORN Canada, about 3% of all Canadians are “unbanked”, meaning they have no bank account.
Unfortunately, not all of those residents are lacking a bank account by choice. Millions of them are simply getting turned down. Luckily, if you’re dealing with a similar financial crisis, there are ways to access fast cash, like a payday loan with a prepaid debit card.
Key Points
- A payday loan with a prepaid debit card is a short-term loan where the borrowed funds are loaded directly onto a prepaid card, offering fast access to cash without the need for a traditional bank account.
- Prepaid cards are typically branded by Visa or Mastercard, so they can be used wherever these cards are accepted.
- Like a regular payday loan, these financing options come with very high fees and short repayment terms, making them very expensive and potentially difficult to repay in full by the due date.
What Are Prepaid Debit Cards?
A prepaid debit card is similar to a normal debit card, only it has a specific amount of money preloaded on it, rather than the funds coming straight from your chequing account. Many different financial institutions and businesses offer these kinds of cards as products or bonuses. Once the card funds are used up, the card can be reloaded or disposed of.
What Is A Payday Loan With A Prepaid Debit Card?
A payday loan is a small high-interest loan of $100 to $1,500 and a short repayment term of 14 to 62 days. While these loans are usually funded by direct deposit or e-transfer, some payday lenders offer prepaid debit cards specifically for customers who don’t have bank accounts or are simply looking for more convenience.
That said, this form of funding is becoming increasingly uncommon. Finding a lender that offers this service can be difficult. That said, some lenders offer cash at their branch locations. You can pick up the cash and load it onto a prepaid card.
Warning: Payday loans are extremely expensive and can lead to a cycle of debt if you’re unable to repay the full amount borrowed. Learn more about the payday loan laws in your province before applying.
How Do Prepaid Debit Card Payday Loans Work?
You can apply for a payday loan in person or online, depending on the lender you choose. Once approved, the payday loan is loaded onto a prepaid debit card. Now you can use the debit card to make in-store purchases, take out cash from an ATM, and even make online purchases (depending on the types of payment the retailer accepts).
You’ll have to repay the funds, plus interest and fees, by a predetermined due date (typically by your next paycheque) or be subject to certain penalties.
Most payday lenders will request a VOID cheque or pre-authorized debit form when you apply. This would allow them to withdraw the amount you owe automatically from your account on the due date.
Can You Get A Loan Without A Bank Account In Canada?
Yes, you can get a loan without a bank account, but your choices will be quite limited. Most lenders prefer applicants to have an active bank account for several key reasons:
- Loan Disbursement: Funds are typically deposited directly into your bank account.
- Repayment Collection: Automatic withdrawals from a bank account make repayment easier.
- Financial Assessment: Access to bank statements helps lenders evaluate your financial stability and ability to repay.
If you don’t have a bank account, you may need to look into alternative lenders or specialized financial services, like a payday loan with a prepaid debit card.
| Instant Bank Verification (IBV) Tools like instant bank verification (IBV) allow lenders to quickly verify your financial details, helping fast-track the loan approval process. But without a bank account, this process is not possible, leaving lenders having to confirm your financial stability in other ways. |
Learn more: No Bank Account Loans In Canada
Prepaid Card Payday Loans vs. Direct Deposit Payday Loans
| Prepaid Card Payday Loans | Direct Deposit Payday Loans | |
| Where to Apply | – In-person – Online | – In-person – Online |
| Amount | Up to $1,500 | Up to $1,500 |
| Funding Time | – Up to 3 business days by mail – Instantly in person | Same day via e-Transfer (depending on time of day you apply) |
| Best For | – Consumers without a bank account – Emergencies | – Emergencies – When you need the money right away |
Benefits Of Payday Loans With A Prepaid Debit Card
Payday loans with a prepaid debit card can come with some notable benefits, including the following:
- No Bank Account Needed: The best thing about payday loans with a prepaid debit card is that you don’t need a chequing account to qualify. This is ideal if you aren’t affiliated with a bank or don’t want to risk your existing account.
- Fast And Easy Funding: Funds are loaded directly onto the card, allowing you to use the money immediately for purchases, bill payments, or ATM withdrawals.
- Convenient Spending: Prepaid cards are typically branded by Visa or Mastercard, so you can use these cards anywhere those cards are accepted.
- Access To Rewards: Some prepaid debit cards come with financial benefits, like cashback rewards. However, this also depends on what type of card you apply for and where you get it from.
- Bad Credit Is Accepted: It can be tough to qualify for any financial product or service if you have a bad credit score (300 – 600). But payday loans do not require a credit check, therefore consumers with bad credit can typically get approved.
Risks Of Payday Loans With A Prepaid Debit Card
All benefits aside, don’t forget that payday loans come with a few serious financial drawbacks, even when they’re given to you on a prepaid debit card:
- High-Interest Rates & Fees: One of the biggest drawbacks of payday loans is that they come with extremely high fees. In most provinces, you’ll pay $14 per $100 borrowed, which works out to roughly 365% APR. This could make your loan very expensive and not worth the potential debt it may cause.
- Short Repayment Periods: The average payday loan term is only 14 days after receiving the funds. While some lenders offer longer plans, this can be especially dangerous if you borrow money using another loan before your first is fully paid.
- Loan Scams: The high-cost credit space is particularly vulnerable to loan scams and unlicensed lenders. Be sure to keep your eyes open for red flags and ensure the lender is licensed.
How To Apply For A Debit Card Payday Loan
To apply for a payday loan on a prepaid debit card, follow these steps:
Step 1: Find A Lender
Make sure the lender is licensed in the province they operate in. You can quickly find a list of lenders by using an online loan comparison site, like Loans Canada. You’ll also want to find out if they offer prepaid debit cards as a form of funding, especially if you don’t have a bank account.
Step 2: Apply
Complete the loan application and supply the lender with required documents to support the information you provide. Payday loans typically require fewer documents, but you still need to provide the following:
- One or more pieces of government ID (passport, driver’s license, etc.)
- Proof of your address and contact information (utility bill, etc.)
- Your Social Insurance Number (SIN) and date of birth
- Proof of your income (recent bank statements and/or pay stubs)
- A pre-authorized debit form or VOID cheque (if using a bank account)
Step 3: Wait For Approval & Funding
Payday lenders typically approve loan applications very quickly. You can get approved and funded for your loan in as little as the same day after applying.
If you apply in person, you can get your prepaid card right away. If you apply online, you may have to wait a few days for your prepaid card to get mailed out.
Bottom Line
Getting a payday loan with a prepaid debit card can be an easy and convenient way of getting extra cash, especially if you don’t have a bank account. But payday loans come with many risks and costs that can put you in a precarious financial situation. Only apply for a payday loan if you have no other option.
Payday Loan FAQs
How long does it take to apply for a debit card payday loan?
Can I add another payday loan to my prepaid debit card?
Should I take out a payday loan or a personal loan?
Can I get a loan without a bank account?
