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📅 Last Updated: June 21, 2024
✏️ Written By Caitlin Wood, BA

Every day, Canadians all across the country deal with financial emergencies: their cars break down, they have to take expensive last-minute trips to deal with family crises, and they lose their jobs. All of these debts and expenses can be financially straining, leading to the need for immediate cash. 

That’s when a payday loan may seem like an extremely convenient way to borrow a small amount of money as quickly as possible. 

What Is A Payday Loan? 

A payday loan is a small, high-cost, short-term loan in Canada. Depending on the lender you borrow from, you’ll be able to borrow as little as $100 to as high as $1,500. Like its name “payday”, repayment is due on the borrower’s next payday, which is typically between 14 to 30 days after receiving the loan. 

Moreover, payday loans are very easy to qualify for, you simply need a stable source of income and an active bank account. No credit checks are required, making it ideal for those with poor credit. However, while convenient, they do have extremely high interest rates and fees, making them a very costly option. Generally, payday loans should only be relied on as a last resort. 

Cost Of Payday Loans 

Payday loans are notorious for their high interest rates and exuberant fees. Some carry a 500% yearly interest rate which will inevitably force you to pay more for interest than the original loan amount. Depending on the province you live in, these rates will vary. 

Cost To Take Out A Payday Loan In My Province?

To see how much it’ll cost you to take out a payday loan, let’s take a look at this example. You have a payday loan of $500 and you have to pay it back within 14 days.

Maximum Cost Of A $100 Payday Loan By Province

ProvinceMax cost per $100 borrowed Max Penalty for Returned ChequeCooling Off PeriodLoan Rollover or Extension
Ontario$15n/a2 business daysNot allowed
British Columbia$15$202 business daysNot allowed
Alberta$15$252 business daysNot allowed
New Brunswick$15$2048 hours (not including Sundays and holidays)Not allowed
Manitoba$17$2048 hours (not including Sundays and holidays)Allowed
Saskatchewan$17$25Next business dayNot allowed
Nova Scotia$15$40 (default penalty)Next business day (or 2 days for online payday lenders)Not allowed
Newfoundland and Labrador$14$202 business daysAllowed
Prince Edward Island$15n/a2 business daysAllowed
Quebec35% AIRn/a10 daysNot allowed

If you’re unable to make the payment, you’ll be charged a penalty fee which can cost up to either $0, $20, $25 or $40. When that happens you’ll be charged interest on the amount you owe + the penalty, which can almost double the amount you borrowed. 

Quebec is different. Quebec has a maximum annual interest rate (AIR) of 35% on payday loans.

Where Can You Get An Online Payday Loan In Canada?

Loan AmountInterest RateTermProvince Availability
up to $3500%up to 65 daysAcross CanadaLearn More
Loan Me Now
Up to $1,000Max 32%Max 90 daysAll of CanadaLearn More
Consumer Capital Canada
Consumer Capital Canada
$500 - $12,50019.99% - 34.99%12 - 60 monthsBC, AB, SK, MB, ON, NB, NS, PEI, NLLearn More
Up to $1,500Varies by province*Max 62 daysBC, AB, MB, ON, NB, NS, PEILearn More
Money Mart
$120 -  $1,500Varies by province*Max 62 daysBC, AB, SK, MB, ON, NSLearn More
Captain Cash
Captain Cash
$500 - $750Varies by province*90 to 120 daysBC, AB, ON, PEILearn More
Go Day
Up to $1,500Varies by province*Max 62 daysBC, AB, SK, MB, ON, NB, NS, PEILearn More
Cash Money
Up to $1,500Varies by province*Up to 62 daysBC, AB, ON Learn More
My Canada Payday
My Canada Payday
$50 - $1,500Varies by province*14 daysBC, AB, SK, MB, ON, NSLearn More
Pay2Day logo
$50 - $1,500Varies by province*Up to 31 daysBC, ON, NSLearn More
Speedy Cash
Speedy Cash
$200 - $1,500Varies by province*Next paydayBC, AB, SK, NS, YT, NT, NULearn More
Up to $1,500Varies by province*Next paydayBC, ONLearn More
*The maximum borrowing cost for a payday loan varies by province, learn more here.

What Is The Payday Loan Cycle?

The payday loan cycle is one of the worst financial situations to be in. You are pulled into the cycle when you can’t afford to pay back your first payday loan. This happens because payday loans need to be paid back by your next paycheque. Let’s say you take out a $500 payday loan today because you have no money and only get paid next Friday. But on the following Friday, the payday loan company takes back their $500 plus interest and now you have no money again and you need to pay rent and buy groceries. This is where the cycle starts because now you need to take out another payday loan to pay rent and buy groceries.

Can You Get A Payday Loan With Bad Credit?

Most payday loan companies do not run a credit check when they review a loan application. This means that having bad credit will not affect your chances of being approved for a payday loan in most cases. With a payday loan, you are limited to how much money you can borrow, however. Most payday loan companies will offer you approximately $100 to $1,500, depending upon many different requirements that you must follow. In many cases, you will have the money in your hand within an hour if you qualify.

Pros And Cons Of Payday Loans In Canada

Like any other credit product, there are both positives and negatives to payday loans. Depending on your financial situation and need, a payday loan can be a good or bad option. 

Payday Loan Pros

  • Online Payday Loans – There are hundreds if not thousands of online payday lenders in Canada. You can apply and get funded without having to step outside your home. Similalry, if you prefer applying in-person, you can find many local payday lenders near you.
  • E-Transfer Payday Loans – Many payday lenders will fund you the money via e-transfer for extra fast funding. 
  • Weekend Payday Loans – There are many payday lenders who operate during the weekends. If you need cash on a Saturday or Sunday, it’s possible through various payday lenders. 
  • No Credit Checks – One of the main appeals of payday loans is they have no credit checks. Many Payday lenders accept Canadians who have bad credit or have previously gone through a bankruptcy or consumer proposal.   
  • Cooling Off Period – In Canada there are numerous laws and regulations to protect consumers from predatory lending practices. Generally, you’ll have 1-2 days to cancel the payday loan without penalty, if you decide against using it. 

Payday Loan Cons

  • Payday Loan Cycle – One of the dangers of payday loans is the payday loan cycle. Many Canadians get trapped into the payday loan cycle because they are unable to repay their first loan. 
  • High Cost – As mentioned before, payday loans have extremely high interest rates and fees. These costs can quickly add up, making it unaffordable. 
  • Predatory Lenders – The payday lending industry is littered with predatory lenders and scammers who prey on borrowers with limited resources and options. 

What Are Your Rights As A Payday Loan Borrower

There are many payday laws and regulations placed to protect the borrower from unethical lending practices. 

  • Cooling Off Period – This is a law that allows you to change your mind about using a payday loan, without any penalty. 
  • Loan Rollovers – Extending or renewing a payday loan is not allowed in most provinces. 
  • NSF Fee –  If you’re unable to pay your loan, there’s usually a fee added to your loan. This can range from $20 – $40 depending on the province you live in. 
Note: Payday loans are extremely expensive and can lead to a cycle of debt if you’re unable to repay the full amount borrowed. To Learn about the payday loan laws in your province, click here.

What Factors Should You Consider Before Applying For A Payday Loan

Before you decide to apply for a payday loan, it is important that you consider the following six factors. These will help you determine if a payday loan is the right option for you. 

  • Your Current Financial Situation – Are you currently struggling to make ends meet? Do you already have a significant amount of debt that you struggle to keep up with? Unfortunately, while a payday loan may seem like a great solution, they usually only increase financial hardship.
  • Available Alternatives – Are there any alternative options available to you? Can you borrow money from a friend or family member? Can you apply for a more affordable installment loan instead? 
  • The Two Week Term – Payday loans must be repaid when you receive your next paycheque, typically within two weeks. Will you have the money to repay the loan, plus interest, in two weeks. 
  • Amount Borrowed – Is the amount you’re able to borrow enough to actually help with your financial issues? Or, will it only add to your debt levels and make dealing with necessary expenses even more difficult?
  • Interest Rate – Before signing on the dotted line, ask about the APR associated with the payday loan. Typically, payday lenders only advertise the two-week fee. Payday loan APRs are often 400% or more.
  • Penalties & Fees – What are the additional fees associated with taking out a payday loan? Are there excessive or even illegal administrative fees? Will you be significantly penalized for making a late payment? 

When Is A Payday Loan A Good Option?

While our number one recommendation is for Canadian consumers to avoid payday loans if possible, we understand that they are certain situations where taking on a payday loan is the only option. 

  • Emergency Situations Emergency situations where additional money is needed as soon as possible, a payday loan could be the best choice simply because of its quick approval times. 
  • You Know You Can Pay It Off – If you could guarantee that you would be able to repay the loan by your next paycheque, then choosing a payday loan to cover an important expense can be a good choice. 
  • You Have No Alternatives – If you’ve exhausted all other alternative options and are struggling to get a loan due to bad credit and negative remarks like a previous bankruptcy and debt settlement, then a payday loan can be a good option. 

Alternatives To Payday Loans

If you’ve been thinking about taking out a payday loan or if ever in the future you need access to money quickly, please consider any of the following options before you decide to take out a payday loan. 

Should You Get A Payday Loan Or A Personal Loan? 

The idea of a payday loan can be very appealing especially if your current financial situation isn’t so great. But what payday loan providers don’t advertise is that once you take out one loan you can be sucked into a cycle that will completely ruin your finances. Small personal loans, on the other hand,  are just as simple and quick as payday loans but they come with significantly fewer problems. 

Interest rates associated with small personal loans are significantly less than those of a payday loan. Moreover, personal loans come with installment payment plans where you’re able to pay off the loan with small affordable payments over an extended period of time, unlike payday loans where the full balance needs to be paid back in one payment. 

Generally, an installment loan is a better choice as it means you won’t be bogged down with the stress of making one huge payment but instead, you’ll have a longer payment period and make smaller payments.

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Payday Loans FAQs

Why are payday loans so expensive?

Payday loans are expensive because the full amount borrowed must be repaid within 2 weeks and they typically have APRs of 500% or more. 

What do I need to get approved for a payday loan?

One of the main reasons why payday loans are so popular is because of how easy it is to get approved. Applicants need to be the age of majority in their province, have a permanent address, a bank account, and a steady income.

What happens if I can’t pay back a payday loan?

As with any type of loan, if you fail to pay back your payday loan, typically you will be charged a late fee and may even have your account sent to collections

Are payday loans bad?

Payday loans are one of the most expensive forms of financing, they are designed to trap you in the payday loan cycle of debt. Because the full amount must be repaid in 2 weeks, most borrowers who are already struggling financially, won’t have the money necessary to do so. This can lead to more debt, credit score problems, and ultimately a cycle of debt that is next to impossible to get out of.  

How To Apply For A Payday Loan?

Applying for and getting approved for a payday loan is a very simple process. All you need to do is request a loan from a payday lender, either in person or online, have a bank account, be at least 18 years old, and be employed or have some form of guaranteed income. Have all that and you’re basically guaranteed a loan.

Looking for An Alternative to Payday Loans?

If you’re interested in more information about the loan options available to Canadians looking to stay away from the payday loan cycle, Loans Canada can help. 

Caitlin Wood Priyanka Correia Lisa Rennie Bryan Daly Cris Ravazzano Margaret Johnson Kale Havervold Liz Enriquez Sean Cooper Veronica Ott Corrina Murdoch Chrissy Kapralos

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