Payday loans in Ontario
You'll pay a maximum of $15 in fees for every $100 you borrow.
If you’re facing a financial emergency, you might find yourself in need of some fast cash. Enter payday loans: a quick and easy way to get your hands on emergency money before your next paycheque. While they’re convenient and easy to qualify for, payday loans are expensive and can throw borrowers into a cycle of debt.
We’ve designed this guide to help you navigate the ins and outs of payday loans, so that you have as much information as possible to make an informed decision about whether to take out a payday loan or seek alternative financing.
Can I get a payday loan in Ontario?
Yes, payday loans are legal in Ontario. Each province has its own rules that govern costs and lending restrictions. In Ontario, the Payday Loans Act, 2018 helps protect people who take out payday loans.
Here are the rules surrounding payday loans in Ontario:
- You can’t be charged more than $15 in fees for every $100 borrowed.
- A lender can charge additional fees if you don’t pay your loan by the due date.
- The maximum amount you can borrow is $1,500.
- You can’t borrow more than 50% of your net income.
- Loans usually must be paid off within 5 – 40 days.
- The maximum loan term is 62 days.
- You can’t get a new loan until you pay off your first one.
- Lenders cannot ask you to sign a form that transfers your wages directly to them.
- Roll-over loans are not allowed. This means you can’t roll over what you owe into a second payday loan.
- Should you change your mind and want to cancel your payday loan, you have two days to do so without facing a penalty. You also don’t have to provide a reason for cancelling.
- Lenders must offer you an extended payment plan if you take out three loans within a 63-day period.
- Lenders cannot offer or sell you any products or services in connection with the payday loan.
⚠️ Warning: be cautious with short-term loans
If you're experiencing financial hardship and would like to speak to someone for free financial counselling, you can call the Credit Counselling Canada on 1800 007 007. It is open from 8:00am to 5pm, Monday to Friday. When comparing short term loans, ensure you take into consideration any fees, charges and rates you may be charged.
Alternatives to short-term loans
Consider these alternatives before applying for a payday loan:
- Use online Government resources. The Financial Consumer Agency of Canada website demonstrates how small amount loans work – and suggests alternative options that may help you.
- Payment plans. Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan or receive an extension on your due date if you’re behind on payments.
- Contact your creditors. Speak with creditors about extending the due date of your payment, or working out a new payment plan that works for both of you. Seek personal loans elsewhere. Consider a small personal loan from a bank or a credit union. You may qualify for a loan with much lower interest rates than those offered by payday loan companies.
- Pay with credit card. Consider paying with your credit card to cover your emergency bills or payments. This is not a long term solution, as you’ll need to pay off the balance as soon as possible, but it’s an alternative to a short term loan with high – and immediate – interest rates.
Cash Money Payday Loan
- Minimum loan amount: $100
- Maximum loan amount: $1,500
- Interest Rate: Varies by Province
- Fees: Up to $17 per $100 borrowed (rounded to nearest dollar)
- Loan term: 12-14 days. Varies by Province
- Turnaround time: Within 2 hours with INTERAC e-Transfer® if approved
- Key requirements: Be 18+ years old, provide proof of recurring income
Fast facts about payday loans in Ontario
- Maximum loan amount: $1,500
- Loan term: Usually 5 – 40 days
- Maximum cost: $15 for every $100 borrowed
Compare payday loans in Ontario
Check the website of any provider you’re interested in to confirm they operate in your province.
What fees will I have to pay?
Although Ontario has laws in place to protect consumers from predatory lending, you’ll still have to pay up to a maximum of $15 for every $100 that you borrow. You have two business days to cancel a contract – known as the “cooling-off period” – for a payday loan without having to pay a fee. Payday lenders can’t give you a loan for more than 50% of your paycheque and the loan agreement must list all of the charges, terms and conditions of the loan.
Example: If your previous paycheque is $1,000, the most you can borrow is $500. If you take out a 14 day payday loan, the chart below shows you the maximum you can be charged.
|Paycheque||Max loan||Max charge||Cost of interest||Repayment Amount||APR (%)|
|$1,000||$500||$15 per $100||$75||$575||391.07%|
Since many providers require that you borrow a payday loan for at least 7 days, the maximum APR you’ll face (with a 7 day payday loan) is 782.14% – no matter the amount you borrow (up to the maximum of $1,500 of course). Let’s take a look at how the APR can change depending on how long you borrow a payday loan for.
|Amount borrowed||Cost of loan||Total repayment amount||7 day loan APR||14 day loan APR||30 day loan APR|
Other forms of financing can be much cheaper than a payday loan. The table below shows the fees you will pay for a payday loan versus a credit card.
|Loan Amount (over 2 weeks)||Payday loan fee||Credit card fee (23%)|
Can I get a no credit check payday loan in Ontario?
Most lenders won’t do a credit check when issuing a payday loan. Instead, they’ll be more interested in you having:
- An active chequing account
- A permanent address (and proof of it)
- Three months of continuous employment (and proof of it)
This lenient criteria can be easy to meet – with the added bonus of not having to prove you’re a responsible borrower. However, some lenders who don’t do credit checks might be more likely to be predatory and illegitimate. This is why it’s important to do your research and use a reputable lender – whether they do a credit check or not.
What should I keep in mind before applying?
If you’re struggling to make it between paycheques, a short-term loan has the potential to help you through your financial troubles. But keep in mind payday loans can be the most expensive solution for your short-term financial problems. You could save big if you think about other ways to solve your money issues.
If you do decide to take out a payday loan, it’s important to borrow only as much as you’ll be able to repay and to budget your repayments accordingly. If you default on your loan or the loan goes into collections, you’ll receive a negative mark on your credit report that can stay there for up to six years. Make sure to budget for the amount of money you plan to take out, and use a licensed lender.
How can I tell if a lender in Ontario is legit?
On top of restrictions on fees and how much you can borrow, Ontario also regulates how payday lenders should act in certain situations. Look for the following signs to make sure you’re working with a legitimate lender:
- The lender displays an Ontario licence number. Always check that a lender is licensed; be aware that there are companies that pose online as payday loan lenders but are actually just collecting your personal information to sell to actual payday lenders.
- It doesn’t allow roll-overs or multiple loans. Ontario law doesn’t allow payday lenders to give out multiple loans. You also cannot roll-over your loan, meaning you can’t add what you owe on one payday loan onto a second payday loan.
- It provides contracts in the language you use to communicate with your lender. This means that if you and your lender communicate in English, your contract must be in English. If you communicate in Spanish, your contract must be in Spanish.
- It follows fee regulations. Stay away from lenders who charge more than $15 in fees per $100 borrowed.
Watch out for unlicensed lenders
Borrowing online can be a lot more convenient than visiting a payday lender in person. But it also comes with a higher chance of borrowing from an unlicensed lender. Consumer Protection Ontario warns borrowers against the following risks of borrowing from an unlicensed lender:
- Illegally high interest rates or fees. If you aren’t borrowing from a lender that’s working legally, there’s a chance you’ll end up paying more than Ontario allows lenders to charge you.
- Identity theft. Unlicensed lenders sometimes sell personal financial information to third parties, which could potentially lead to identity theft or a hacked bank account.
- Funds taken from your bank account without your permission. Some unlicensed lenders illegally withdraw money from borrower’s bank accounts if they’re unable to make repayments.
Unlicensed lenders can operate out of the province or even outside of Canada, making it difficult for Ontario to prosecute them. That’s why it’s so important to make sure your lender is licensed to operate in Ontario before you borrow.
How to file a complaint against a lender
If you want to file a complaint against a lender, you can send a preliminary letter of complaint to the business. If they fail to respond, you can contact Consumer Protection Ontario, who will act on your behalf to contact the lender. If Consumer Protection Ontario finds that your lender violated provincial law, it could take legal action against the business. This includes revoking its license, slapping it with a penalty and even filing a civil action to get a settlement for customers if the lender is facing numerous complaints.
Short-term loan alternatives in Ontario
If you’re not sure you want to take out a payday loan, you have other options. Here are some programs and lenders you might want to check out.
Ontario assistance programs
Ontario has some programs that can help lower the costs of everyday expenses for some residents and newcomers who are struggling to make ends meet.
- Ontario child benefit provides low-income families with financial assistance to cover expenses like medical bills, food, rent and utility bills.
- Ontario Works can provide you with money and help you find a job during temporary financial difficulties.
- Resettlement Assistance Program provides financial assistance to refugees and protected persons for accommodations, essential clothing, household effects and living expenses.
- Income Assistance Program provides funding to First Nation communities to help their eligible members meet basic needs, such as food, clothing and shelter.
- Ontario Disability Income Support helps people with disabilities who are in financial need pay for living expenses, like food and housing.
Local financial institutions
Some credit unions and local banks offer less expensive small-dollar financing amounts with longer repayment terms. You could also look into credit builder loans, which come in small amounts and can help you improve your credit score by reporting every on-time repayment you make to credit bureaus. You also typically have more time to pay it off.
If you’re struggling with your personal finances, you might want to consider enrolling in a credit counselling program. These programs can help you make a budget and manage your debts for the long-term.
How can I apply for a short-term loan?
If you’re interested in applying for a payday loan in Ontario, you’ll need to meet the following eligibility criteria:
- Be at least 18 years old
- Prove 3 months of continuous employment
- Give proof of address (e.g., they can ask to see a utility bill)
- Have an active chequing account
To complete your application successfully, prepare to submit some basic information:
- Personal details, such as your name, date of birth, Social Insurance Number and a valid form of ID
- Contact details, such as your residential address, email address and phone number
- Details about your employment and income
If you’re considering taking out a payday loan, familiarize yourself with the laws of Ontario to make sure you’re aware of the maximum amount of fees you can be charged, as well as other lending rules. As with all forms of credit, be prepared to pay for both the principal and the fees.