Which Province is The Worst to Borrow in?

Which Province is The Worst to Borrow in?

Written by Chrissy Kapralos
Fact-checked by Caitlin Wood
Last Updated November 10, 2021

Going through life without having to borrow money is almost impossible, even if you’re relatively stable, financially. Most people need to borrow money for a home in the form of a mortgage, borrow funds for post-secondary education, and take out loans for other life expenses like cars, dental work, renovations… anything! Depending on the province in which you reside, you are subject to different interest rates on your loans, as well as rules and guidelines. Every province has their own set of borrowing laws, particularly for payday loans and personal loans. 

Payday Loan Laws By Province

For each point provide some details regarding it – What is it, how it works, what the max and min penalty, interest rate etc. 

ProvinceMax cost per $100 borrowed (Max Interest Rate)Max Penalty for Returned ChequeCooling Off PeriodLoan Rollover
Ontario$15n/a2 business daysNot allowed
British Columbia$15$202 business daysNot allowed
Alberta$15$252 business daysNot allowed
Manitoba$17$2048 hours (not including Sundays and holidays)Allowed
Saskatchewan$17$25Next business dayNot allowed
Newfoundland and Labrador$21$202 business daysAllowed
Nova Scotia$19$40 (default penalty)Next business day (or 2 days for online loans)Not allowed
New Brunswick$15$2048 hours (not including Sundays and holidays)Not allowed
Prince Edward Island$25n/a2 business daysAllowed

Payday Loan Interest Rates

Interest rates on payday loans are exorbitantly high, with some amounting to 500-600%.  Although most provinces have caps on interest rates, experts recommend that you explore every other option available to you before you consider a payday loan. For example,  Ontario has a cap of $15 while P.E.I has a cap of $25 per $100 borrowed. If you borrowed $300 with a 14 day term, that would equal to an APR of 391.07% and 651.79% respectively.

Maximum Penalty For a Returned Cheque or Pre-authorized Debit

If you are unable to make a payment on your loan, lenders will usually charge you a fee. Depending on your province of residence, these fees range anywhere between $20-$50. Some areas, like the territories, for example, have unregulated fees. This makes it likely that the fee will be extremely high. 

Cooling-Off Period

A cooling-off period is the amount of time you have to change your mind on the loan you’ve just obtained. Similar to Air Canada’s 24-hour free cancellation policy, a payday loan’s cooling-off period allows you to cancel the loan without any fee or penalty. This period usually ranges between 1-2 days. It’s important that you ask your lender what the loan’s cooling-off period is before you sign anything. Most provinces have laws that protect your right to cancel a loan within the cooling-off period. 

Learn more about your rights and responsibilities as a borrower.

Loan “Rollover” 

A loan rollover refers to a lender extending or renewing your loan, or giving borrowers a second loan to pay off an initial loan. Renewing a loan often costs more, as lenders charge borrowers an extra fee. Many provinces, particularly Alberta, British Columbia, New Brunswick, Nova Scotia, Ontario, Saskatchewan, and Quebec, have laws prohibiting a lender from rolling over a loan. 

Payment of a Payday Loan

While borrowers can pay back their loans through varying methods, including e-transfers, cash, and cheque, some borrowers might transfer their wages directly to the lender. To do this, a lender will usually require you to sign a contract outlining your permission to have them obtain their payments through direct wage transfer. This practice of having wages directly transferred to the lender is prohibited in the following provinces: Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, Saskatchewan

What does it mean when your lender asks to connect your bank account.

Payday Loans in Quebec

In Quebec, lenders cannot charge more than 35% annually in interest on payday loans. This interest rate is similar to what you would pay for a credit card cash advance. Despite this being law, there are many online and unregulated lenders in Quebec offering illegal interest rates higher than 35%. Although the government is actively trying to crack down on these lenders, the online platform makes it difficult for authorities to take action. In Quebec, it’s paramount to know their payday loan regulations to avoid being scammed by illegal lenders

What’s The Worst Province to Borrow in?

So given each province’s unique restrictions and maximum rates and penalties, you might find some provinces better or worse to borrow in. 

If you’re looking at roll-over laws as a factor, the worst provinces to borrow in are Manitoba, Prince Edward Island, and Nova Scotia. 

If you’re looking at flexibility in cancellation outlined by cooling-off periods, the worst provinces to borrow in are Saskatchewan above all, then Manitoba and New Brunswick. 

If you’re concerned about maximum penalties for returned cheques, the worst province to borrow in is Prince Edward Island, followed by Newfoundland and Labrador. 

Frequently Asked Questions

Which Province has the highest cost of borrowing in Canada? 

Each province has a limit on how much they can change a borrower. P.E.I has the highest cost of borrowing with an interest cap of $25 per $100 borrowed. That’s equivalent to an APR of  651.79% on a regular 14 day payday loan. 

Should I get a payday loan? 

Payday loans are one of the easiest and fastest ways to access cash due to their low requirements. However, borrowers should beware as they are one of the hardest loans to payback because they come with high interest rates and costly fees. Moreover, payday loans are notorious for leading borrowers into a trap called the payday loan cycle

Can I get a Payday Loan in Quebec? 

Payday lenders are not easy to come by in Quebec due to new laws that prohibit them from charging an annual interest rate above 35%. This rate doesn’t financially work for payday lenders as the loans have a short term, making it impossible to make a profit. As such, payday lenders don’t usually operate in Quebec.  

Final Thoughts

Borrowing is often vital to keeping up with life’s expenses. If you find yourself in a position where you have to take out a payday loan, make sure you’re up-to-date on your province’s regulations and laws surrounding these loans. Do your research so that you don’t fall into the trap of an unlicensed and illegal payday lender. 

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Chrissy is a Toronto-based communications advisor. With an English degree from the University of Toronto and editing courses under her belt from Ryerson University, she has continued her lifelong passion for writing and editing. In addition to working for Loans Canada on a variety of financial topics, Chrissy has a few years of resume writing and editing under her belt, and takes great pleasure in helping people find work that fits with their experience and passions. When she isn't working, you can find her practicing yoga, hanging out with her dog, reading up on financial and real estate news, or planning her next trip abroad.

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