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Payday loan interest rates
Payday loans come with notoriously high interest rates.
Payday loans are small loans with very short repayment terms and exorbitant borrowing fees. Depending on your province or territory, you could pay between $15 and $25 for every $100 borrowed.
What are the payday loan interest rates in Canada?
The annual percentage rates (APR) for payday loans in Canada are much higher compared to other types of loans. APR is a loan’s interest rate and fees expressed as an annual cost. It gives you a truer view of the cost of a loan, and it helps you compare the cost of different types of loans.
Payday loan APRs typically range from about 390% to 780%, with many payday loans sitting around the 540% APR mark. As an example, let’s take a $900 payday loan in Ontario with a borrowing fee of $135 ($15 charged for every $100 borrowed). If you have a repayment term of 14 days, your APR would come out to 391.07%.
How do payday loan rates differ from other financial products?
Payday loans have higher APRs compared to credit card cash advances and personal loans for bad credit. Credit card cash advances typically have a 23% APR plus a fee, while bad credit personal loans tend to max out at 47% APR.
Let’s go back to the $900 example. Here’s how the costs would compare:
|Payday loan ($15 for every $100 borrowed)||Credit card cash advance (23% APR + 5% fee)||Personal loan (46.96% APR)|
|Loan term||21 days||21 days||6 months|
|Borrowing cost||$135||$11.91 + $45 = $56.91||$171.20 monthly payment, $127.21 in total interest|
The credit card cash advance is the cheapest option. The costs of the bad credit personal loan and payday loan are almost the same in dollar terms. The key difference is the loan term; the personal loan has a longer loan term of 6 months, allowing you to spread out your payments.
Can a payday loan interest rate change depending on my personal situation?
Unlike other types of loans, the borrowing fee of a payday loan is the same for borrowers and does not depend on personal factors, such as credit score and income. Lenders in the payday loan space tend to charge the maximum they’re legally allowed to, no matter your financial situation.
The payday loan’s APR, however, can change depending on your loan term. Let’s go back to the $900 loan example with a borrowing fee of $135:
|Loan amount||Borrowing fee||Loan term||APR|
Even with the maximum loan term allowed for payday loans, the APR is still very high.
What other fees come with payday loans?
If you want to take out a payday loan, a lender cannot charge you any fees besides the borrowing fee. However, if you don’t pay back your loan on time, you will be charged fees like NSF fees and late payment fees.
What to consider with payday loans
Before getting a payday loan, examine your financial situation and decide if a payday loan is truly the best option for your financial needs. If you don’t think you can make the repayments, don’t take a loan out in the first place. Explore other options like a credit card cash advance, an installment loan or borrowing from friends or family. Payday loans should be a last resort.
If you decide that a payday loan is the right option for you, be absolutely sure that you can afford to make the repayments on time. Also, check that you’ll have enough income left to pay for other expenses once you repay your payday loan. Otherwise, you may find the need to apply for another loan.
⚠️ Warning: Be cautious with payday loansPayday loans are expensive. If you're experiencing financial hardship call Credit Counselling Canada for free financial counselling (Monday-Friday 8:00am-5:00pm at +1 866-398-5999). Consider payday loan alternatives:
- Visit 211.ca. A free and confidential service that connects you to organizations that can help with finances, food, housing and more.
- Debt relief companies. There are services to help you reduce your debt payments.
- Payment extensions. Talk with bill providers about longer payment plans or due-date extensions.
- Side jobs. Sell unwanted items online, sign up for food delivery and more.
Compare payday loans
Maximum borrowing costs per provinceAlways refer to your contract for exact repayment amounts and costs as they may vary from our results.
|Province||Maximum allowable cost of borrowing|
|Alberta, British Columbia, New Brunswick, Ontario & Prince Edward Island||$15 per $100 borrowed|
|Manitoba, Saskatchewan & Nova Scotia||$17 per $100 borrowed|
|Newfoundland and Labrador||$21 per $100 borrowed|
|Northwest Territories, Nunavut & the Yukon||Up to $60 per $100 borrowed|
|Quebec||Limit of 35% annual interest rate (AIR)|
How to compare payday loans
How to apply for a payday loan
If you’re interested in applying for a payday loan, follow these steps:
- Research and compare your options. Take the time to compare the different lenders and the loans they offer.
- Meet the eligibility requirements. To be eligible for a loan, you must be at least 18 years old or the age of majority in your province or territory, have proof of an income and be a Canadian citizen or permanent resident. You may also need to have a valid bank account.
- Apply. Once you decide on a lender, you can apply on their website or visit a branch in person if the lender has physical locations.
Are payday loans available in my province or territory?
Payday loans are available in all provinces and territories across Canada. You should be aware that payday loans are regulated by individual provinces, which means costs and fees can vary. Ensure that any lender you choose abides by the laws of the place you live.
The Yukon, Nunavut and the Northwest Territories do not have legislation regulating payday loans at the territorial level. Payday loans are regulated in these territories at the federal level only.
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