A payday loan is a short-term loan with high fees that make it a very expensive way to borrow. You can borrow up to $1,500. You must repay the loan when you receive your next paycheque.
In the following provinces, you have up to 62 days to repay the loan:
If you cannot repay the loan on time, you will have to pay more fees and interest. This will increase your debt.
Payday loans exist to help you if you run out of money before your next payday, or for a short time. Avoid using it to pay for costs like rent, groceries, or utility bills. If you use them this way, you could end up in financial trouble.
Payday loans are offered in-store and online by private companies.
What to expect when getting a payday loan
Here’s what you can expect if you’re thinking about getting a payday loan.
Information to provide to a payday lender
Generally, payday lenders ask you to prove that you have:
a current income
a bank account
a permanent address
Before giving you a payday loan, payday lenders ask you to do one of the following:
complete a form allowing the lender to withdraw the full amount of the loan, plus the fee, directly from your bank account when the loan is due (also called a pre-authorized debit)
provide a post-dated check for the full amount of the loan plus fees
Be careful when giving your banking information to a payday lender, as they will have access to the funds in your account.Getting money from a payday lender
In most cases, the payday lender will deposit the money into your bank account or give you cash.
However, in some cases, the payday lender may require you to receive the loan on a prepaid card. There may be additional charges to activate and use.
Repay a payday loan
Some payday lenders will ask you to repay your loan at the same place you received it. In many provinces, a payday lender cannot extend or renew your payday loan.
Make sure you understand the loan agreement
Payday lenders will ask you to sign an agreement. This agreement outlines the costs of your loan, including interest, fees and the due date. Read this agreement carefully before signing it. Ask the payday lender questions if there’s anything you don’t understand.
Check with your provincial or territorial consumer protection office about the rules governing payday loans where you live.
Online payday loans
Payday lenders can conduct their business in a physical location or online. You have to be careful with online payday lenders. Many of them do not have a license. These lenders do not follow all provincial rules designed to protect borrowers. Only use the services of licensed online payday lenders.
Contact your provincial or territorial consumer protection office to check if a payday lender is licensed.
Beware of online payday lenders located outside of Canada. If you ever have problems with these lenders, it might be difficult to sort them out.
Also watch out for online sites that claim to offer payday loans. Some of them just collect your information and give it to an actual payday lender.
How much does a payday loan cost
Payday loans are very expensive compared to other ways of borrowing.
Here are the reasons:
you have to pay high fees
costs can correspond to an interest rate of 500-600%
you may have to pay a fee if your check or pre-authorized debit does not clear
These high costs can make your loan more difficult to repay, which can increase your financial problems and increase your stress.
Before getting a payday loan, you need to be sure you can repay it on time. Otherwise, your financial situation could worsen. Your debt may continue to pile up and you may end up paying a lot of money over time