When the unexpected happens and you have nowhere else to turn, a payday loan might be the solution. But treat it as a last resort — it’s one of the most expensive types of financing. We’ll help you understand how these loans work, what to consider before borrowing and how regulations vary between provinces and territories. Plus, we’ll provide you with some alternatives to these high cost loans.
⚠️ Warning: Be cautious with payday loans
Payday loans are expensive. If you're experiencing financial hardship and would like to speak to someone for free financial counselling, you can call Credit Counselling Canada from 8:00am to 5:00pm Monday to Friday at +1 866-398-5999.
Consider these alternatives before applying for a payday loan:
Contact your creditors. Speak with creditors or your electricity, gas, phone or water providers about extending payment due dates or working out a new payment plan.
Consider a personal loan. A personal loan usually comes with much lower interest rates than a payday loan.
Pay with credit card. While not a long term solution, paying with credit card can help cover emergency expenses. You’ll need to pay off the balance before it accrues interest.
Compare payday loans
Check the websites of any lenders you’re interested in to confirm they operate in your province or territory of residence.
A payday loan is a short term loan of up to $1,500 provided in the form of credit that is advanced to you when you need some money. It’s generally paid back at the same time you receive your paycheque, hence the term “payday loan”. These short term loans can also be referred to as “cash advance loans” and “bad credit loans”. In Canada, payday loans are regulated under individual laws and restrictions in each province –but beware: not all provinces have the same legislation, and none of the territories have legislation surrounding these loans.
How are payday loans different from personal loans?
Shorter loan term. Payday loans are designed to be short term solutions to your financial problems. You generally won’t find a loan that extends beyond six months – with the most common length being just 14 days – although terms will differ between providers.
Lenders accept poor credit scores. Payday lenders often do not conduct a credit check – although you may need to provide proof that you can repay the loan, say with proof of a steady income or a bank account in good standing.
Higher rates and fees. Due to their short term nature and accessibility, payday loans come with much higher annual percentage interest rates (APRs) than other forms of credit. All provinces, with the exception of the three territories, regulate how high these APRs can be, but even with regulation, many are still very steep when compared to other types of credit. Be sure to take into account the full cost before you apply.
While all 10 provinces have legislation at the provincial level, the three territories – Yukon, Northwest Territories and Nunavut – are still patiently waiting, and instead have federal regulations.
$15 per $100
Maximum borrowing amount of $1,500. Term of loan cannot exceed 62 days. Only one loan per borrower at a time is allowed. Cooling off period of two business days. Borrowing limit of 50% of recipient’s paycheque. Lender is restricted from accessing the borrower’s bank account or wages. Payday loans cannot be rolled over or extended.
$15 per $100
Maximum borrowing amount of $1,500. Term of loan cannot exceed 62 days. Cooling off period of two business days. Lender is restricted from accessing the borrower’s bank account or wages. Payday loans cannot be rolled over or extended.
$17 per $100
Maximum borrowing amount of $1,500. Term of loan cannot exceed 62 days. Cooling off period of next business day. Borrowing limit of 50% of recipient’s paycheque. Lender is restricted from accessing the borrower’s bank account or wages. Payday loans cannot be rolled over or extended.
$17 per $100
Maximum borrowing amount of $1,500. Term of loan cannot exceed 62 days. Cooling off period of 48 hours, excluding Sundays and holidays. Borrowing limit of 30% of recipient’s paycheque. Lender is restricted from accessing the borrower’s bank account or wages. Loans can be extended or rolled over.
$15 per $100
Maximum borrowing amount of $1,500. Borrowing limit of 50% of recipient’s net income. Cooling off period of two business days. Lender is restricted from accessing the borrower’s bank account or wages. Payday loans cannot be rolled over or extended. Lender must offer ‘Extended payment plan’ if borrower takes out three loans within a 63 day period.
Limit of 35% annual interest rate (AIR)
Maximum borrowing amount of $1,500. Term of loan cannot exceed 62 days. Payday loans cannot be rolled over or extended.
Newfoundland and Labrador
$21 per $100
Maximum borrowing amount of $1,500. Term of loan cannot exceed 62 days. Cooling off period of two business days.
$15 per $100
Maximum borrowing amount of $1,500. Lender is restricted from accessing the borrower’s bank account or wages. Cooling off period of 48 hours, excluding Sundays and holidays. Payday loans cannot be rolled over or extended. The loan amount is limited to 30% of the recipient’s net pay.
$19 per $100
Maximum borrowing amount of $1,500. Term of loan cannot exceed 62 days. Cooling off period of next business day. Lender is restricted from accessing the borrower’s bank account or wages. Payday loans cannot be rolled over or extended.
Prince Edward Island
$25 per $100
Maximum borrowing amount of $1,500. Term of loan cannot exceed 62 days. Cooling off period of two business days.
Northwest Territories, Nunavut & the Yukon
$60 per $100
Term of loan cannot exceed 62 days. Maximum borrowing amount of $1,500.
Fees for loans differ between provinces and territories.
Depending on the province where you reside, the fees for your loan will differ. For example, in Ontario you’ll pay $15 in fees for every $100 you borrow, while in PEI you can pay up to $25 per $100 borrowed – one of the highest amounts in Canada.
In the case of Ontario, if you borrow $1,000, you’ll pay $150 in fees provided you repay the payments on time. You must pay the full principal amount and fees, which would amount to a total of $1,150. While in PEI, you’d face $250 in fees.
In Saskatchewan, you’ll be charged $17 in fees for every $100 you borrow. So, if you borrow $5,000, you’ll be required to pay $850 in fees. You must pay the full principal amount and fees, which would amount to a total of $5,850.
What other fees are associated with payday loans?
If you’re late or miss a repayment, you may be charged other fees, which can include:
Late payment fees. If you’re late with a repayment and don’t notify your lender beforehand, then you’ll likely be charged a fee.
Bounced cheque or failed direct debit. If your payment bounces, you will usually be charged a fee.
Arrears fees. You’ll be charged a fee if your account goes into arrears.
Collection fees. Any loans which are referred to collections or are defaulted on may incur additional fees.
Collection letter send out. If you receive a collection letter because you’ve failed to make a repayment and the lender cannot contact you then you may be charged a fee.
Statement fee.If you request an account statement from the lender you may be charged a fee.
How to apply for a payday loan
Although the actual application process will vary based on the lender you choose, these are the typical steps you’ll need to follow to apply for a payday loan.
Provide information about yourself, including your contact details and Social Insurance Number.
Fill in your employment details or benefits information if you’re receiving government benefits such as a pension, EI or welfare.
Provide additional information about your income, including how frequently you’re paid and how much.
Enter your bank account details and agree to electronic transfers. Confirm the website is secure before providing this information.
Be at least 18 years of age
Have a valid photo ID
Have a permanent adress and a working phone number
Have an open and active bank account
Have a steady source of income
Note: Remember that meeting the eligibility requirements does not guarantee the approval of your payday loan.
Valid ID with name and address
Valid phone number
Proof of income with employer’s name, address and phone number or government benefits or investment income
Net and gross income amounts
Bank account information (chequing account, routing and institution numbers)
Payday loans are not viewed positively as they usually come with excruciatingly high fees. Many customers who desperately need financing turn to payday loans as they are easy to get and provide quick financial relief – but they also throw many people into an endless cycle of debt with their high costs.
You can also be penalized for not sticking to the repayment requirements. If you default on the loan or the loan goes into collections, you’ll receive a negative mark on your credit score that can stay there for up to six years. It’s important to only borrow as much as you’ll be able to repay and to budget your repayments accordingly. If you have any doubts about your ability to meet your repayments, then you may want to consider other credit options.
Must read: A warning about payday loans
Payday loans are heavily regulated in provinces – but not the territories – and for good reason: Payday lending is one of the single most predatory forms of credit available and can easily ruin your finances when you’re already in a pinch.
When APRs can reach well over 400%, it’s glaringly clear that these seemingly quick fix-it loans are anything but. Provincial regulations are put in place in order to protect consumers – but rules and regulations vary dramatically between each province. But ultimately, these protections are put in place to help borrowers avoid a debt spiral that payday lenders set them up for.
Before you dive into a product marketed as a one-stop financial Band-Aid, consider your alternatives. Though they aren’t significantly better, installment loans can come with slightly less egregious terms and more manageable payments. And while it may require a level of humility and openness, asking to borrow money from friends or family could be another possibility.
You can also look into alternatives to borrowing. Services may be available in your area to those in need. Even if you aren’t sure if you qualify, it’s worth researching local assistance programs for food, housing and other necessities. These services may also be able to help you identify and address any structural issues that can keep you in debt, such as a lack of budgeting or overspending.
Though you may not have a lot of extra time, a side gig could also be an option. Ideas include driving with a ride share service like Uber, walking dogs, participating in research studies or even taking online surveys to earn more cash. If you find yourself regularly needing small amounts of money to last you through the week, consider exploring ongoing freelance opportunities in your area of expertise — Upwork and Fiverr are a few websites that connect freelancers and clients.
Payday loans have both a high rate of default and repeat borrowing, which could trap you in a debt cycle and even more financial distress than when you started. By researching your many options, you may be able to avoid getting caught in dangerous lending, while still getting the money you need.
Am I eligible for a payday loan if…
I receive a pension?
If you’re retired or physically unable to work, you can still access a line of credit, personal loan or a short term loan. Some lenders consider your pension as income, so you may still be eligible depending on your financial situation and why you need the loan.
I receive welfare payments?
Some payday lenders and institutions do consider welfare payments as income, so you may be eligible for a payday loan. It generally depends on how much you earn, what kind of financial situation you’re in and what kind of payments you receive. Contact a lender to find out if you’re eligible.
I have bad credit?
While short term lenders offer flexible eligibility criteria that often results in accepting those with less-than-perfect credit, there are some payday lenders out there that won’t check your credit report at all.
You can consider a payday loan with no credit check. Having bad credit shouldn’t stop you from getting a loan. Find out which companies will lend you money.
Find a personal lender who doesn’t check your credit report. Why should what you earn now be affected by what you did in the past? Find a lender who will assess you on your financial situation as it stands today.
Frequently asked questions
Lenders will have a maximum loan amount ($1,500 in all provinces), while some may have a lower maximum amount for first-time borrowers. The amount you’re able to borrow is based on your ability to repay your loan, which depends on how much you get paid and your financial situation. You can use the payday loan calculator above to help see what your repayments will be on different loan amounts.
If this is your first time taking out a payday loan, it’s important to understand the process before you apply. In Canada, you can apply in store or online for a payday loan, so make sure you have all of your personal documents and financial details handy. You’ll need to compare or inquire about things like fees and charges, minimum income, employment terms, eligibility and whether the lender does a credit check.
Each lender is different so ensure you understand each step of the process before continuing. Make a note of the terms and the repayment amounts and dates and ensure you will have enough to repay your loan. If you need any assistance, the lender will be able to answer any questions you may have. Some lenders have in-person branches while others have online chat, email and phone options.
Payday loans are an expensive form of credit and should only be applied for if you have no other options. Some high-profile lenders have been fined by the government for overcharging customers and others have been criticized for approving loans to people who can’t afford it. This is why so many regulations are now in place in provinces across Canada. These regulations change constantly, so do your research and keep in the know for your specific province.
While these types of loans are heavily regulated by the Government of Canada, it’s important to remember they are expensive and you shouldn’t apply if there are alternatives available to you. Before you apply, see if you may be eligible for another type of credit that may be better suited to your needs. It’s a good idea to calculate costs to see if any of the alternatives are cheaper than a payday loan – which they likely will be.
For example, a credit card cash advance is also a convenient way to get cash but can carry a 20%, or sometimes even greater interest rate. But this might be substantially cheaper if you’re able to pay it off within a couple of weeks. There are also low interest loans you can consider through your bank or credit union. If you have no other alternatives and have determined you can afford the loan, then a payday loan might be a viable option for you to consider.
Many payday lenders allow you to pay off your loan early without any extra fees associated. You’ll still have to pay the full amount associated with your contract. Contact your payday loan credit provider if you need to organize an early payment. Keep in mind some providers may charge extra fees for this service, so it’s best to ask before you borrow the loan.
The majority of lenders will direct debit your account on the day you get paid, but will not deduct the repayment amount directly from your pay as this is illegal in many provinces.
Most payday lenders will provide you with a decision on the spot or within 60 seconds. They may need supporting evidence of your wage and employment via bank statements and pay slips. Depending on who you bank with, the funds will be in your account or available for pickup within 24 – 48 hours. This will also depend on whether this is your first loan and if it’s a weekend or public holiday. Many payday loan providers claim to offer same day funding, but this usually depends on which bank you’re with. If you’re stuck for cash on a Saturday or Sunday, and you already have a relationship with a lender, it could be worth comparing its offerings.
Payday loans are regulated by the provincial governments and are designed to be a short term solution to financial problems. There are various restrictions around borrowing more than one loan at once, however this depends on the province where you reside.
In line with government regulations, you cannot renew or roll over your loan in most provinces – Manitoba and PEI are the exceptions.
In all other provinces, you must pay your loan back. You’ll never be charged a renewal fee for any loan you take. If you want to take another loan, you’ll first have to pay off your current loan and then re-apply for a new loan, after assessing your current financial situation.
If you make all of your repayments on time, then a lender may approve you for another payday loan. Some lenders have benefits for repeat borrowers such as increased borrowing amounts and quicker funding. However, it’s important that you keep in mind these loans are not a long-term solution, and if you frequently need to borrow money, then you may need to consider a longer term borrowing option or a more stable line of credit. It may help to lower your expenditure each month to overcome your cash shortfall. If you’re really struggling, speak to a credit counsellor.
Payday loan companies use a secure online system to keep data safe. Payday loan applications are generally carried out on a secure online application form to help protect your privacy. These systems use a secure server and SSL encryption to ensure your personal information cannot be stolen.
To verify your income, payday lenders will likely need a snapshot of your account for the past 90 days. These services involved are 100% safe and secure and they only provide a “read-only” view of your account. There are no personal details transmitted and no access to any other information besides your financial history is needed.
You’ll need to speak to a specific loan provider in order to determine if you’re still able to apply for a short term loan with no snapshot of your bank account. With some lenders, you may be able to provide other forms of proof or information.
With the current government regulations, Canadians can have access to extra cash if they meet the eligibility criteria. There are specific companies that offer payday loan services in Canada like Money Mart, Cash Money, LendDirect, iCash, My Canada Payday and many other smaller, local companies.
Aliyyah Camp is a writer and personal finance blogger who helps readers compare personal, student, car and business loans. Aliyyah earned a BA in communication from the University of Pennsylvania and is based in New York, where she enjoys movies and running outdoors.
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