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A payday loan is a lump sum of cash (usually $100 – $1,500 maximum) that you can borrow in most parts of Canada. Normally, this type of loan comes with fast approval, easy requirements, and a short repayment term of 14-days following the deposit of your funds. Once your term ends, you must pay off the entire loan, plus interest and fees.
A payday loan should typically only be used as a last resort. In other words, when you’re dealing with bad credit, a pressing debt or a lack of savings. While payday lenders advertise these loans as cheap and easy, they are anything but.
The maximum borrowing rate that payday lenders can legally charge varies by province. Here’s a chart to show you the real costs of payday loans:
Province | Max Amount Lender Can Charge Per $100 | APR Equivalent |
Alberta | $15 | 391.07% |
British Columbia | $15 | 391.07% |
Manitoba | $17 | 443.21% |
New Brunswick | $15 | 391.07% |
Newfoundland & Labrador | $21 | 547.50% |
Nova Scotia | $19 | 495.36% |
Ontario | $15 | 391.07% |
Prince Edward Island | $25 | 651.79% |
Saskatchewan | $17 | 443.21% |
According to the interest rates above, here’s what you could pay to borrow different-sized payday loans with a 14-day term in Canada:
$100 | $300 | $500 | $700 | $1,000 | $1,500 | |
AB | $115 | $345 | $575 | $805 | $1,150 | $1,725 |
BC | $115 | $345 | $575 | $805 | $1,150 | $1,725 |
MB | $117 | $351 | $585 | $819 | $1,170 | $1,755 |
NB | $115 | $345 | $575 | $805 | $1,150 | $1,725 |
NL | $121 | $363 | $605 | $847 | $1,210 | $1,815 |
NS | $119 | $357 | $595 | $833 | $1,190 | $1,785 |
ON | $115 | $345 | $575 | $805 | $1,150 | $1,725 |
PEI | $125 | $375 | $625 | $875 | $1,250 | $1,875 |
SK | $117 | $351 | $585 | $819 | $1,170 | $1,755 |
If you can’t afford to pay back your full payday loan by the time your term finishes, the lender could tack on some hefty late penalties too, such as:
Here’s a table that shows the maximum penalty fee that a payday loan lender can legally add to your debt for a pre-authorized payment that doesn’t go through or for a returned cheque.
Province | Max cost per $100 borrowed | Max Penalty for Returned Cheque | Cooling Off Period | Loan Rollover or Extension |
Ontario | $15 | n/a | 2 business days | Not allowed |
British Columbia | $15 | $20 | 2 business days | Not allowed |
Alberta | $15 | $25 | 2 business days | Not allowed |
New Brunswick | $15 | $20 | 48 hours (not including Sundays and holidays) | Not allowed |
Manitoba | $17 | $20 | 48 hours (not including Sundays and holidays) | Allowed |
Saskatchewan | $17 | $25 | Next business day | Not allowed |
Nova Scotia | $19 | $40 (default penalty) | Next business day (or 2 days for online payday lenders) | Not allowed |
Newfoundland and Labrador | $21 | $20 | 2 business days | Allowed |
Prince Edward Island | $25 | n/a | 2 business days | Allowed |
Quebec | 35% AIR | n/a | 10 days | Not allowed |
Before you borrow a payday loan anywhere in Canada, there are some other important costs that you should consider, including but not limited to:
All of these consequences can have a serious negative impact on your creditworthiness and finances as a whole.
Remember, payday loans have high-interest rates, which is one of the main reasons to avoid them unless they’re absolutely necessary. For instance, if your only problem is bad credit, you’re probably better off using a credit card cash advance or a bad credit personal loan.
Example #1 – Payday Loan
Example #2 – Credit Card Cash Advance
Example #3 – Personal Loan
As you can see, the cheapest product is the credit card cash advance, however, the personal loan allows you to pay off your $1000 over a longer period. While it does cost an extra ~$15 in interest, it can be well worth it due to the affordable monthly payments. Moreover, even though the personal loan payment term is longer, it ends up being much cheaper than the payday loan too. So, if you have other options, avoiding payday loans is a safer idea overall.
If you absolutely need to borrow a payday loan, make sure you do research and find a lender that’s not only trustworthy but also charges rates and fees you can afford. Here are some of the main things to look out for when choosing a payday lender:
Payday loans can seem like the answer to your prayers when you’re down on your luck and need money in a hurry. But before you accept the money, you should think about the real cost of taking out that loan. More often than not, an installment loan is so much cheaper and a far better alternative that will keep you from falling into a continuous cycle of debt.
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Loans Canada is pleased to announce it placed No. 131 on the 2022 Report on Business ranking of Canada’s Top Growing Companies.
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