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Payday Loans

What You Need to Know

While payday loans might seem like a quick and convenient solution when you're in a financial bind, there are substancial risks to consider.

Understanding Payday Loans

What is a Payday Loan?

Payday loans are short-term loans—usually no more than two weeks—meant to help people cover sudden and unexpected costs, such as an urgent car or home repair until they next receive income. 

However, some people begin to rely on payday loans to make up for recurring cash shortfalls and this can make fixing debt problems much more difficult.

Payday Loan

How Do Payday Loans Work?

You can cancel a payday loan within two business days of signing the loan agreement. You must return the full amount of the loan, but you don’t have to pay the cost of borrowing.

Whatever amount you borrow, you must get the full amount without any deductions. For example, if you borrow $300, you must be given $300.

You do not have to repay any money before the day your loan comes due.

You can repay the loan early (before the due date) and the payday lender cannot charge an extra amount.

You can ask as many questions you need to fully understand the terms of your loan agreement, such as:

  • What are the upfront fees and charges?
  • What’s the annual percentage rate of the loan?
  • What are the methods of repayment?
  • What happens if I can’t pay the loan back on time?
  • What will I be charged if my payment is late?

Did You Know?

As of January 1, 2018, Ontario payday lenders cannot charge more than $15 per $100 advanced, down from $18 per $100 advanced.

Be Informed About Payday Lenders

Payday lenders must be licensed and the license must be displayed in their stores and on their websites. Never borrow from an unlicensed payday lender.

All payday lenders must provide you with a copy of your payday loan agreement at the time you borrow the money. The first page of this agreement must show:

  • Amount being borrowed
  • Number of days for the loan
  • Exact day the loan must be repaid
  • Total cost of the loan, including any fees or charges

A payday lender cannot make you buy another service as a condition of getting a loan. For example, they cannot say, “You’ll have to buy our insurance.”

A payday lender cannot give you another payday loan until the first loan has been repaid in full.

A payday lender cannot ask your employer for your wages to repay the loan.

As of January 1, 2018, Ontario payday loans have a maximum cost of borrowing set at $15 for every $100 borrowed.


Borrower Beware!

The maximum cost of borrowing applies until the date your loan is due. If you don't pay on time you may have to pay interest. Check your agreement to see what rate of interest may apply if your repayment is late.

Some lenders are charging as much as 60%.

Get the Free Guide to Payday Loans!

Payday loans are a very expensive way to borrow and should only be used as a very last resort. This FREE guide offers practical advice on the dos and don'ts of payday loans and money management.


Download Your Guide!

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