What is a Vig on a Loan?

If you’ve ever watched The Sopranos, you’ve more than likely heard the phrase “vig” tossed around when a character is talking about lending money. Or maybe you’ve heard a family member or friend ask about “the vig” on your car loan, personal loan, consolidation loan, or mortgage. It’s not a common term that financial institutions use—so what is a vig? A phrase not used by anyone dealing with payday loans in Ottawa.

Simply put, vig is a slang term that is used to describe the interest rate for a loan. Generally, this is one of the ways banks and lenders make money. If someone asks, “What’s the vig on the loan?” what they are really asking is, “How much money are you paying in interest for your loan?” In a world like The Sopranos, however, where loan sharks are everywhere, they’re referring to interest paid in cash. For loan sharks and characters like Tony Soprano, the vig is straight profit.

Of course, while it was a fabulous and critically acclaimed drama, it’s worth noting that The Sopranos is a far cry from real life. In the real world, the vig on a loan isn’t necessarily paid in cash or even upfront (which certainly feels a little shady). Instead, it’s rolled into your loan payments, so that you are paying both interest and principal with each monthly payment.

Can I Trust a Lender that Uses the Term “Vig”?

Most lenders will use “interest” rather than “vig” in their communications and paperwork. Not only does vig have a bit of a negative connotation to it, as a result of being associated with the mob and loan sharks, but it’s also not a commonly used or understood term. So if a lender uses “vig” instead of “interest rate,” does that mean you shouldn’t trust them?

The answer isn’t exactly black and white. Using “vig” isn’t necessarily a warning sign that they are not a reputable lender—as long as they are transparent, licensed, and operating under guidelines. Make sure you do your own independent research into their company policies, customer service, and accreditation just as you would with any other lender. Researching a lender before going ahead is financial advice you should consider as a teenager, young adult, or anyone really.

How Does Interest Work on a Loan?

Interest is essentially a fee that you pay that allows you to borrow money. It’s also how financial institutions like banks and credit unions are able to offer loans—they actually earn money on every loan that they issue through interest. Your interest can then be used to offer a loan to someone else, and earn more money through their interest, and so on.

When you take out a loan, your interest is calculated as a percentage of your loan. The amount of interest you end up paying throughout the life of the loan depends on:

• How high your interest rate is
• How much you are borrowing
• How long your loan terms are

Understanding the above will help you structure your monthly living costs appropriately. This might be relatively easier if you stay in BC and have experienced an increase in wage. Notably, loans in higher amounts—such as mortgages or auto loans—tend to have a lower interest rate and longer loan terms than, say, a personal debt consolidation loan. In these scenarios, financial institutions don’t need to skyrocket interest rates, since the borrower will be paying for much longer and on a much higher amount. A four percent interest rate on $200,000 over 30 years is much more lucrative over time than a 20 percent interest rate on $4,000 over two years.

Interest is calculated based on the amount that you currently owe. As a result, the good news is that as you pay down the principal balance on your loan, the total dollar amount of your interest should gradually decrease over time. But in the case of a $200,000 loan, it might take decades for that interest rate to really start dropping—so don’t expect to see results anytime soon. As such, if you run a business that requires taking loans, you'll want to ensure you hire the right employees so you can maximize your funding and resources.

How Does Interest Work with My Canada Payday?

As a short-term lender, loan rates with My Canada Payday are higher than what you might pay with your bank or credit union. But because the terms for payday loans only last for 30–60 days, you are paying interest for a much shorter period of time—which makes payday loans a much more affordable option over the long run.

And with loans available up to $1,500, you have the ability to borrow only what you need, instead of getting locked into thousands of dollars that will end up costing even more money to borrow over time.

It’s also much easier to apply and qualify for a short-term loan with My Canada Payday. This is especially helpful if you are still working on building your credit, don’t have an established borrowing history, or don’t meet income requirements from other financial institutions. The requirements for submitting an application are:

• Be a Canadian resident that is at least 18 years old
• Have a steady job that is local to you
• Show proof of steady income
• Maintain at least 180 days of banking history
• Have 15–30 minutes to fill out an online application

Whether you call it vig or interest, it’s a necessary piece of the lending and borrowing process. You can’t get away from it entirely, but you can take steps to verify that you are signing an agreement that doesn’t put you into more debt while you borrow! Make sure that you fully understand your loan terms and your interest rate so that you can make smart financial decisions when you need to take out a loan.

If you want to decrease the amount of interest you pay on your loans over time, My Canada Payday is ready and waiting. With a seamless application process and fewer restrictions on credit, income, and borrowing history, short-term loans are a great option for anyone who needs cash quickly. Stop waiting on banks and credit unions, and reach out by phone (604-630-4783) or email (getpaid@mycanadapayday.com) to get the funds you need, today!