Maybe you don’t have enough money to pay your rent or your car just broke down and needs pricy repairs to get it back on the road. If you find yourself short of cash, you may think that a payroll loan could help you out of your situation.
What exactly is a payroll loan and will it help you out financially? Find out in our guide below.
⚠️ 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 Credit Counselling Canada on 1800 007 007. It's open from 8:00am to 5pm, Monday to Friday. When comparing short-term loans, ensure you take into consideration all fees, charges and interest to understand how much your loan might cost in total.
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.
A payroll loan is more commonly known as a payday loan. It’s a short term loan – typically no more than $1,000 to $1,500 – that you usually repay when you receive your next paycheque. This type of loan is handy when you urgently need access to cash.
A payroll loan can get you cash quickly and easily, but it can also be very expensive.
There may be better personal finance options for you
Short term loans can be good in an emergency, but they may not fit your needs. There are plenty of other ways to get financing that are much cheaper, including installment loans, personal loans, credit card advances and borrowing money from friends and family.
A selection of short term loans you can apply for
Check the websites of any lenders you’re interested in to confirm they operate in your province or territory of residence.
*The products compared on this page are chosen from a range of offers available to us and are not representative of all the products available in the market. There is no perfect order or perfect ranking system for the products we list on our Site, so we provide you with the functionality to self-select, re-order and compare products. The initial display order is influenced by a range of factors including conversion rates, product costs and commercial arrangements, so please don't interpret the listing order as an endorsement or recommendation from us. We're happy to provide you with the tools you need to make better decisions, but we'd like you to make your own decisions and compare and assess products based on your own preferences, circumstances and needs.
Pros and cons of payroll loans
They’re easy to get. Lenders rarely check credit histories for these types of loans, and the eligibility requirements are minimal. They’re more concerned with your ability to make your repayments.
Get cash quickly. As long as you have the necessary information handy, many applications can be completed online or in person in under ten minutes, and some lenders can get you the cash you need within just one business day.
Very expensive. You’ll pay significant interest rates regardless of how much you borrow. Interest for these types of loans tends to be $15 to $25 for every $100 you borrow, depending on the province or territory where you reside. This means if you take out a $500 payroll loan, you could pay $75 to $125 in interest fees alone.
Must be repaid quickly. Payroll loans are typically due on your next payday, whether that’s 7, 14 or 31 days away.
Can trap you in an endless cycle of debt. It’s important to be sure that you have the money to pay your loan back in full, including the interest and extra fees. Many borrowers fail to budget for their repayments and end up taking out more loans just to repay the debt. If you don’t think you can make the loan repayments, you may need to avoid taking out a payroll loan in the first place.
How to compare short term loan lenders
It’s an excellent idea to shop around before settling on a payroll loan or loan provider. Here’s what to look for when considering different lenders:
Although reputable and trustworthy payroll loan lenders do exist, the online payroll space is filled with deceptive lenders and loan scams.
To protect yourself, thoroughly investigate lenders and read their reviews. If you’re considering an online lender, contact them for their physical address – any legitimate lenders will readily give you details about themselves.
Compare interest rates between multiple lenders. A seemingly attractive interest rate might be beaten by a different lender.
Interest rates are often expressed in APR (annual percentage rate), but some lenders express their rates as monthly percentages. Remember that if a loan’s monthly interest rate is 20%, its annual rate is 240% (or 20% times 12). APRs for many payroll loans tend to sit around 400% or higher.
You may not only be paying interest on your loan – you might have to pay additional fees before or during your payday loan. You may be on the hook for administrative and processing fees, depending on the type of loan. Additionally, you will have to pay late fees if you don’t make your repayments on time.
Before taking out any loan, read the lender’s terms and conditions thoroughly. Be sure that you understand every fee you’re asked to pay, and request clarification if you don’t.
Can I get a payroll loan if I don’t have a bank account?
Yes, you can get a payroll loan if you don’t have a bank account through two options:
Prepaid credit card loans. You apply for your short term loan either online or in person at a store, and if you’re approved, they transfer your funds into an eligible loan account. They then register a prepaid credit card with that account, and either hand it to you in-store or mail it to you.
In-store loan. You apply for your short term loan either online or in person at a store, and if you’re approved, you can pick up your money at the store.
Payroll loans are fast and easy to get with their stringent eligibility criteria, however that advantage is counterbalanced by a heavy downside – they can be extremely expensive.
Since payroll loans offer easy access to funds, they’ve thrown many borrowers down into deep spirals of debt. To avoid the same fate, consider alternative options like personal loans or borrowing from friends and family. If those aren’t viable alternatives for you, compare your short term loan options and be sure you can pay off the loan on time.
Frequently asked questions
You can start by contacting a financial counsellor who can help you identify and address the structural issues that keep you in debt, for example, the lack of budgeting or overspending.
Since they’re excruciatingly expensive, payday loans may not be the best option. One idea is to consider alternative paths like personal loans, borrowing money from friends or family or finding side jobs to earn extra money.
These loans are usually extended for a short amount of time, so lenders want to ensure they’ll make a significant profit from the interest over the short repayment period.
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, meaning costs and fees can vary. Ensure that any lender you choose abides by the laws of the place you live.
At the time of writing in July 2018, the Yukon, Nunavut and the Northwest Territories do not have legislation regulating payday loans.
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.
How likely would you be to recommend finder to a friend or colleague?
Very UnlikelyExtremely Likely
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which finder.com receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. finder.com compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.