Adult Financial Literacy Guide | Page 19

Pay Day Loans You can usually borrow up to 50% of your next pay-cheque amount. To get the loan, they will ask you for additional info (for example, identification, pay stubs etc). Pay day loans are a very expensive way to borrow money. There are many high service fees and interest charges. These get even higher if you do not pay the loan back on time, you may not be able to avoid paying the interest – there could even be fees for paying the loan back early! The average fee for a two week, $300 loan is over $60. If you work that out to a yearly interest rate, it is 520%! If you do take a pay day loan, make sure you review the loan agreement and understand its terms before you sign it. Always keep a copy for yourself. A pay day loan is a short-term loan of two to four weeks against your next pay cheque. Pay day loans are offered by private lenders and cheque cashing outlets. If you are thinking about a pay day loan, here is a link to 10 FreeImages.com Content License-Kate Gelman questions to ask yourself before taking out the loan: http://www.fcac-acfc.gc.ca/Eng/resources/publications/creditLoans/Pages/ Consider-Vousenvi.aspx Cheque Cashing Outlets These places will charge you a percentage of your cheque plus a service fee to cash your cheque! For example, on a $1,000 cheque they could charge you a 3% fee ($30) plus a $3 service fee – that’s $33 to cash your cheque! Did you know …? You don’t need a bank account to cash a government cheque? You can bring it into any bank (even if you don’t have an account there) and they will cash it for free. 19