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Should I take out a payday loan?

With such high costs, they're best saved as a last resort.

With APRs over 300%, taking out a payday loan is one of the most expensive ways to borrow money. But when you’ve run out of options, this type of loan can help you stay afloat.

When should I avoid payday loans?

Generally, you might want to stay away from payday loans in the following situations:

  • You have time to qualify for a less expensive alternative. The main advantage of payday loans is that they’re fast and available to borrowers with less-than-perfect credit. But there are payday loan alternatives that are significantly cheaper and come with fewer risks.
  • You have ongoing financial problems. A payday loan is a short-term solution to temporary problems. If you have ongoing financial difficulty, consider talking to a credit counsellor who can walk you through your other options instead.
  • You already have a payday loan. Rolling over your payday loan can get you trapped in a cycle of debt and cost you three or four times the amount you borrowed in fees. If you’re struggling to repay a payday loan, also consider credit counselling.
  • You need more than $1,500. Payday loans max out at $1,500. If you need to borrow more, this isn’t the right type of loan for you.
  • You don’t think you can pay it back. Many provinces require payday lenders to make sure you have enough income to repay your loan. But even if yours doesn’t, borrowing money you’re unable to repay will land you in an even worse financial situation.

When should I consider a payday loan?

A payday loan is designed to help you in an emergency. If you’re certain you will have the funds to repay a payday loan within a short period of time, it might be useful in the following situations:

  • You have bad credit and need money fast. If you have bad credit, most options that are available to you on short notice are expensive. In this situation, a payday loan might be the least-expensive option out there.
  • You need less than $500 and need money fast. Loans under $500 on short notice can also be difficult to come by, regardless of your credit score. Payday loans are one of your few options.
  • You need money today. Payday loans are one of the few financing options available the same day — especially if you don’t have perfect credit, a car to use for collateral or need money on the weekend.
  • You don’t have a bank account. You need a chequing or savings account to qualify for most types of loans. However, some payday lenders don’t require you to have a bank account and instead offer the funds in cash or on a debit card.
  • You don’t have a salary. A payday loan might be one of the few options out there if you rely on alternative sources of income, such as government benefits, a pension or alimony.

Payday loans vs. overdrafting your account

Overdraft protection is a service offered by banks. An overdraft occurs when there isn’t enough money in your bank account for a transaction, but your bank allows the transaction to go through anyway for a fee. Overdrafting your account can be the closest alternative to taking out a payday loan — you can get the money instantly. However, overdraft protection may be subject to credit approval.

Most payday loans come with a $15 to $25 fee per $100 borrowed, depending on where you live and the lender. With the big banks like TD, CIBC and BMO, the average overdraft fee per use is $5 plus 21% interest for the year. The average limit is $5,000.

What are some alternatives to payday loans?

  • Installment loans. These are a type of personal loan offered by online lenders. They tend to have smaller loan amounts, shorter terms and higher interest rates than the average personal loan. They also have more lenient requirements.
  • Line of credit. This is also offered by online lenders. Borrow up to a predetermined amount, and pay it off anytime.
  • Bad credit personal loans. Also offered by online lenders, a bad credit personal loan is available to borrowers with a credit score below 560.
  • Government resources. If you’re experiencing a long-term financial setback, look into government resources available to residents of your province to help you cut down on living expenses.

Compare even more alternatives to payday loans

⚠️ Warning: Be cautious with payday loans
Payday 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 A free and confidential service that connects you to organizations that can help with finances, food, housing and more.
  • Debt relief providers. There are services to help you reduce your debt payments.
  • Payment extensions. Talk with bill providers about longer payment plans or due-date extensions.

Compare payday loan options

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Name Product Loan Amount Loan Term Interest Rate Turnaround Time Serviced Provinces Offer Table description
GoDay Payday Loan
$100 - $1,500
Up to 62 days
Varies by province
As little as 2 minutes with INTERAC e-Transfer®
To apply, you'll need to be a Canadian resident over the age of 18 with a valid email address, phone number and an open bank account with a Canadian bank or credit union.
iCASH Payday Loan
$100 - $1,500
7 - 62 days
Varies by province
As little as 2 minutes with INTERAC e-Transfer®
Get up to 20% in cash back once your payday loan is fully repaid. Conditions apply.
Same day cash up to $1,500 for car payments, rent, mortgage, home & appliance repair, and more. 24/7 instant approval and e-Transfer funding. Income of at least $800/month required.
Maximum borrowing costs of payday loans per province
Always 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 $14 per $100 borrowed
Quebec Limit of 35% annual interest rate (AIR)

Bottom line

A payday loan can help in an emergency when you have no other options. But you might want to look into your cheaper alternatives first to avoid getting caught in a cycle of debt.

You can learn more about how these loans work by reading our guide to payday loans.

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