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📅 Last Updated: September 29, 2021 ✏️ Written By Bryan Daly 🕵️ Fact-Checked by Caitlin Wood
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Are you a Nova Scotia resident going through a financial rough patch? If so, you’re probably wondering about how payday loans work and how they might help you out of a bind. While payday loans might appear to be an easy solution to your money problems in Nova Scotia, they can get you in trouble when you rely on them too much.
What Do You Mean, “Trouble”?
Chances are you’ve seen some payday loan lenders on the street or online in Nova Scotia. They may look beneficial, drawing you in with perks, such as:
- Zero credit check or collateral required
- Rapid approval
- Small cash amounts that are normally easy to finance ($1,500 or less)
In fact, generally speaking, the only elements you need for approval are a stable source of income (3 months minimum), a Nova Scotia address, and a chequing account.
If you’re applying for a payday loan, it’s probably because:
- Your credit and income are not sufficient for you to qualify for other loan products (credit cards, personal loans, etc.) at banks, credit unions or alternative lenders
- You have an essential bill or other expense that needs paying immediately, but not enough cash or credit to handle it
- You’re in one or both of these situations, but you think you’ll be able to repay the loan by the time your next paycheck arrives
However, trouble arises when the payday loan cycle starts. Here’s how it might happen:
- Firstly, you’re only given 14 days (the typical wait time between paychecks) to pay the full balance of your loan
- If you’re late or you skip your payment, you’ll be charged a hefty penalty, maybe even an interest rate spike
- Payday loan lenders in Nova Scotia are allowed to charge up to $22 per $100 you borrow. That’s over 600% APR (annual percentage rate)!
- These high rates, coupled with other added costs (administration fees, broker fees, cheque cashing fees, etc.) can make your small loan extremely costly
- Coupled with your other weekly or monthly expenses in Nova Scotia, you suddenly don’t have enough money set aside to reimburse the loan by the 2-week mark
- The lender charges you extra for being late on your payments
- If your income is that low, you may continually need payday loans just to get by
Break the payment loan cycle today! Check out this infographic to learn more.
Aren’t There Rules for Payday Loan Lenders in Nova Scotia?
Luckily, many parts of Canada, Nova Scotia included, have been cracking down on payday loans, imposing new rules under the Consumer Protection Act, so that lenders have far less potential of using predatory tactics. Some of these rules in Nova Scotia include:
- A valid, yearly renewed business license must be held by every lender and approved by the provincial government
- Lenders in Nova Scotia must display loan costs, interest rates, requirements and other essential information through specific store advertising and on every loan contract
- Borrowers in Nova Scotia who apply in-store are given until the end of the next business day to cancel their loan, free of charge
- Borrowers who apply online are given 48-hours to cancel their loan, free of charge
- If they wish, borrowers are allowed to pay off their full balance before the due date without penalty (if a lender charges you for an early payment, you are legally entitled to a refund)
- If a borrower requests an extension on their loan, the lender is only allowed to charge interest, no penalties will be applied
- Lenders are not permitted to “roll over” your loan (if you already owe them money, they cannot grant you a new loan)
Is There a Chance I Could Be Scammed?
While predatory lending is slowly being regulated across Canada, the increase of online payday loan lending has brought more risk of scamming for Nova Scotian borrowers. Predatory lenders and scam artists target borrowers in Nova Scotia who are in critical need of money and are quick to fork over their personal and banking information because of it. This leaves borrowers open to fraud, identity theft, and eventual financial ruin.
When searching for payday loans online, be very cautious! Here are a few warning signs you can look out for:
- The “lender” has a bad reputation or no reputation at all. Most legitimate lenders in Nova Scotia will show up in the Better Business Bureau database. If they aren’t listed, you come across bad customer reviews or no reviews whatsoever, don’t give them any information and walk away.
- They charge rates higher than $22 per $100 borrowed. Remember, it is illegal in Nova Scotia for a lender to charge more than 22% interest for any payday loan. If they do, they are surely trying to scam you.
- They offer the “rollover” alternative. Another surefire sign of a scam or a predatory lender. Rolling over your unpaid loan is also an illegal practice.
- They’re pushy, rude or inappropriate in any way. There’s a big difference between a little sales pitch and aggressive behaviour. If the supposed lender is clearly being forceful or threatening you into applying for the loan or paying it off, report them to the proper authorities right away.
- Their information is unclear. A good scam artist knows how to sweet-talk you. Legitimate lenders are required to tell you how much your loan will cost and about all their policies. If their advertising is unspecific in any way or the salesperson is avoiding your questions, it’s yet another sign that they’re trying to mislead you. Even if they seem polite, don’t be fooled.
Do you know what the true cost of borrowing is? Click here to find out.
Can I Stop the Payday Loan Cycle or Avoid it Completely?
Absolutely! Depending on your income, employment record, current debts and credit strength (credit score, credit report, payment history, etc.), there are numerous alternatives in Nova Scotia for both debt relief and to help you avoid the payday loan cycle.
Here are just a few of the methods you can test out, many of which Loans Canada can provide you with:
- Personal loans: Secured or unsecured installment-based loans of varying amounts. Collateral or co-signers are optional but helpful. Read this to find out how you can get the best personal loan in 2018.
- Regular credit cards: As long as you qualify and can afford your monthly payments, these are good for covering reasonable expenses and building credit. Learn how to choose the right credit card for you by clicking here.
- Secured credit cards: If you don’t qualify for regular credit cards, these can be acquired in exchange for a security deposit equal to your credit limit.
- Debt consolidation loans: While you often need decent credit and an appropriate income to be approved, these loans can lump all your smaller debts into one, more affordable payment.
- Debt management programs: If you’re working with a credit counsellor, they can negotiate a payment plan or partial payment of your debts with your creditors. Here’s what to expect if your program is approved.
- Consumer proposals: If your debt is totally out of control, you may need to hire a licensed insolvency trustee to draw up a legal agreement between you and your creditors. If approved, this will lead to a more affordable payment plan or a partial payment. To discover the ways an insolvency trustee can help you, see here.
- Bankruptcies: Only to be used as a last resort, declaring bankruptcy will free you from most of your debts. However, it will be followed by several years worth of surplus income payments, damaged credit, and other such consequences.
For more information or financial help and to find credit counselling in Nova Scotia, click here.
Frequently Asked Questions
What happens if I’m late in repaying my payday loan?
This will differ from provider to provider, so make sure to contact your payday lender to get full details. They may offer an extended payment plan or waive the late fee if you notify them in advance. If your payment is overdue, they cannot charge you more than 60% annual interest for the time that it’s late.
What are the maximum allowed interest rates for payday loans in Nova Scotia?
Nova Scotia has one of the highest payday loan rates in the country. Payday lenders are allowed to charge up to $19 per $100 borrowed. On the other hand, many other provinces allow only up to $15. Late payment fees are also slightly higher, with a maximum allowable fee of $40. Ontario, for example, caps it at $25 and only allows it to be charged once.
Can I still get a payday loan in Nova Scotia if I’m unemployed?
Yes, it’s entirely possible. There are many providers that will consider non-employment income sources. This non-employment income can be from a government support program. And some payday lenders will consider such an income when reviewing your application. Depending on the provider, such incomes can include the Canadian Pension Plan (CPP), Employment Insurance (EI), disability assistance, and private pensions.
Nova Scotia, Meet Loans Canada
Payday loans shouldn’t be your only source of financing. Contact the Loans Canada Team today if you’re having trouble breaking your payday loan cycle or if you want access to another credit product in Nova Scotia that will help you avoid it altogether.
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