📅 Last Updated: September 30, 2021
✏️ Written By Bryan Daly
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Prince Edward Island, while being the smallest province in Canada, is still home to plenty of borrowers who suffer from debt issues. Unfortunately, many of them could end up relying on payday loans just to get by. Hopefully, that’s not the case for you, but if it is or if you’re trying to avoid payday loans in Prince Edward Island, Loans Canada has some information you might consider useful.

The “Advantages” of Payday Loans

Payday loans are easy to be approved for, which makes them appealing. You don’t need a good credit score or even any credit history. If you can prove that you have at least 3-months of steady income, an active chequing account, and a P.E.I. address, you can apply and be approved for a small amount of cash (usually less than $1,500) within a couple of hours.

This can seem like a good option if you:

  • Have a nerve-racking expense to cover, such as a rent payment to avoid eviction
  • Don’t qualify for other credit products with your bank or another conventional lender
  • Feel confident enough that you can pay your full loan within 2 weeks
  • Don’t mind the extremely high interest rates that come with most payday loans

This can be a bad option if you:

  • Receive an income that is not large or steady enough to cover the full cost of the loan, plus interest, by the end of your 14-day term (standard time given by payday loan lenders)
  • Have an expense that is not absolutely necessary or needs to be paid right away
  • Would rather the option of lengthier payment times or a longer payment term
  • Are looking for a lower interest rate, so you can save money

How to Break The Payday Loan CycleLearn how to break the payday loan cycle and take back control of your finances, click here.

Missing a Payment or Getting a Payday Loan: Which is Cheaper?

Depending on your financial situation and what kinds of expenses you’re trying to cover, believe it or not, it might actually be cheaper to miss a payment than to take out a payday loan. That’s because, as was mentioned just above, the interest rate that accompanies typical payday loans in Prince Edward Island can be extremely high.

In P.E.I., payday loan lenders are permitted to charge:

  • Up to $25 per $100 borrowed
  • This is one of the highest interest rates in Canada at over 650% APR (annual percentage rate)
  • A standard late/default penalty fee of $40

Let’s say, for example, you miss a credit card payment. As long as this isn’t a frequent occurrence, a normal late penalty fee is $15-35 (depending on how late you are and what card you have). So, if you decide to charge your expense to your card, then make a late payment, you would save a bit more money than you would with a payday loan.

Here’s how you can rebuild your credit after a late payment.

In addition, you’ll be given 30 days to make a payment (rather than 14) and the option of sticking to a minimum monthly payment (rather than having to pay in one lump sum). While it’s true that your credit cards can also lead to severe debt when not managed responsibly, they can still be a better payment method than payday loans.

Read this to learn some methods of consolidating your credit card debt.

Other Payday Loan Rules In Prince Edward Island

If you’re still determined to use a payday loan, it’s best that you study the rules that the government of Prince Edward Island has set in place (apart from the maximum cost of borrowing) to regulate the way payday loan lenders do business.

These other rules include (but aren’t limited to):

  • All lenders must possess a valid license to operate
  • All lending locations must contain advertising of specific proportions, displaying the costs and specific regulations of their loan products (ex: posters must be at least 61 cm in width by 76 cm in length)
  • All lenders must provide borrowers with the exact details of their loan cost, payment term, total fees, interest rate, etc. within their loan contacts
  • No lender may provide or allow “rollover” agreements (grant the borrower a second loan if their first loan has not been paid in full)

Alternative Forms of Financing

If payday loans are starting to sound unappealing to you, there are a number of other financing solutions that might work better for your particular debt situation, many of which we offer right here at Loans Canada.

To avoid payday loans, you can also look into:

  • Personal loans
  • Secured credit cards
  • Car/vehicle title loans (only if you own the vehicle completely)
  • HELOCS, home equity loans, second mortgages, refinancing (only if you have equity in your home) Click here to learn how to access your home equity in 2018

In extreme cases of debt, you can also try:

  • Credit counselling
  • Debt consolidation loans
  • Debt management programs
  • Consumer proposals
  • Bankruptcy

Make sure to ask your lender if and how you can qualify for these products. While many of these solutions will depend on your current debt level, credit health and income, they will likely be less hazardous to your finances.

The True Cost of BorrowingBorrowing can sometimes cost more than you think, check out this infographic for more information.

Predatory Lending and Scamming: The Warning Signs

Payday loans in Prince Edward Island aren’t yet outlawed, but they’re still a popular way to get quick cash. So, many predatory lenders and scam artists use this idea to their advantage. While there are some payday loan lenders that do operate legally, there are some who are out to steal your money or your personal/banking information. When it comes to payday loans, know your rights!

Here are some warning signs to look out for:

  • A lender trying to charge more than $25 per $100 you borrow
  • A lender who offers a “rollover” service, which you should always avoid
  • A lender who won’t give you all the information you request or tries to avoid your questions through obvious sales ploys
  • A lender tries to deduct payments directly from your bank account

Frequently Asked Questions

Can I get a payday loan in Prince Edward Island with no credit check?

Usually, payday lenders do not check credit reports or report to the credit bureaus. They mainly determine approval by verifying your income, identity, address, and bank account. Applying or being approved for a payday loan alone shouldn’t affect your rating in any way. The caveat is if you default on your payday loan. Your debt could be sold to a collections agency. They will most likely report the unpaid loan to the credit bureaus, and having something in collections can worsen your credit rating substantially. Be sure to ask the provider in advance if they require a credit check and how they handle reporting.

What happens if I’m overdue on my payday loan?

The consequences of being overdue on a payday loan can differ from provider to provider. They may charge you a steep penalty for a declined payment or a late payment. During this late period, additional interest may be accrued, not exceeding the national rate of 60% APR including interest and fees. Contact them as soon as possible to ask about their extended payment plan and negotiate any additional fees. If the debt is not settled for too long a period, they will eventually send your outstanding balance over to a collections agency. The agency will in turn contact you intermittently to try to collect the debt. They will also report your defaulted debt as a collections item to the credit reporting bureaus. This will severely worsen your credit rating and should be avoided at all costs.

What is the interest rate limit for payday loans in Prince Edward Island?

The province of Prince Edward Island holds the highest payday loan rate limit in the country at $25 per $100 borrowed. Ontario, for example, allows only up to $15. On a two-week loan, Prince Edward Island’s limit is equivalent to a 650% annual interest rate. The rationale that payday lenders use to charge such high-interest rates is the quick turnaround of loan agreements. Payday loans are expected to be repaid within 2 to 8 weeks maximum. Typical interest rates below the 60% national limit wouldn’t be commercially viable for such a short time period.

A Better Financial Future is Only a Click Away

Remember, while payday loans in Prince Edward Island can get you out of a sticky situation, they can also ruin your finances and when you start to rely on them for every expense that comes your way. Instead, try applying at Loans Canada. We can help you find a solution today!

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