Compare payday loans

People often turn to payday loans for those times when there’s a little more month left at the end of the money. According to the Financial Consumer Agency of Canada, most payday loan borrowers use the money to cover necessary expenses like bills or unexpected expenses that come due before payday. We’ll help you understand what a payday loan is, what to consider before borrowing, how they’re regulated and some alternatives to these high-cost loans.

What is a payday loan?

Payday loans are high-interest loans of up to $1,500. These loans are typically paid back when your next paycheque is deposited in your account, hence the term “payday loans.” They are also often referred to as “cash advances.” In Canada, payday loans are regulated at the provincial level, except for territories, which are federally regulated.

Where can you get payday loans in Canada?

If you need to get a payday loan, you can apply either online or at a physical store:

Payday loan options	Quick facts
Online lenders	Quick and easy Apply for and manage your loan from a phone app or website No need to fax any documents Get your money within minutes after approval via e-transfer
Storefront lenders	Some lenders have extensive branch networks You can apply at a physical store at a location near you You’ll need to bring the required documentation Get instant approval

How much do payday loans cost?

Payday loans are one of the most expensive ways to borrow money. The annual percentage rate (APR) charged on payday loans is very high, often between 390% and 780%. For comparison’s sake, credit card APRs sit between 12% and 29.99%, and personal loan APRs are between 6.99% and 46.96%.

Depending on your province, the fees for your loan will differ. For example, in Ontario, you’ll pay $15 for every $100 borrowed, while in Newfoundland, you’ll pay $14 for every $100 borrowed.

What other fees are can come with payday loans?

If you’re late or miss a repayment, you may be charged other fees, which can include:

• Late payment fees. If you’re late with a repayment and don’t notify your lender beforehand, then you’ll likely be charged a fee.
• Bounced cheque or failed direct debit. If your payment bounces, you will usually be charged a fee.

How are payday loans different from personal loans?

There are some key differences between payday loans and personal loans. They include the following:

• Payday loans have shorter terms.
  Payday loans get their name because you’re typically required to pay back your loan by your next payday. They’re designed to be short-term solutions to your financial problems. When you apply for a loan, the lender asks you how frequently you’re paid to determine your final repayment due date.
• Payday loans have higher rates and fees.
  Due to their short-term nature and accessibility, payday loans come with much higher APRs than other forms of credit. Even with provincial and territorial regulation, APRs frequently reach well over 300%, which is staggeringly high compared to typical personal loan interest rates of 2-47%. So be sure to take into account the full cost of a payday loan before you apply.
• Payday loans have smaller loan amounts.
  How much you can borrow may depend on the province or territory you’re in, but you can usually borrow $100 up to a maximum of $1,500.
• Payday loans provide quick access to cash.
  Most payday lenders will provide you with a decision on the spot or within 60 seconds. If you clear verification of your identity and income, you could receive funds immediately after approval.

Compare payday loans

What are the benefits of getting payday loans?

When you apply for a payday loan, some of the benefits include:

• Fast and easy. You can usually apply for payday loans online in under 10 minutes, get an instant decision and get instant funding if you’re approved.
• Bad credit doesn’t matter. Payday lenders shift the emphasis from your credit score to your ability to repay your loan. As long as you can prove you have a stable income to repay your loan, you should be in the clear.
• Non-employment income is okay. Unlike most personal loans, you can use non-employment income, such as government benefits, to qualify for a payday loan.

Are payday loans a bad idea?

Payday loans are not viewed positively because of their extremely high fees. Customers who desperately need financing turn to payday loans as they are easy to get and provide quick financial relief – but they can also throw borrowers into a cycle of debt. Before taking out a payday loan, make sure you’ll have enough income left to pay for other debts or expenses once you repay your loan. Otherwise, you may find that you need another payday loan to cover the income shortage.

Before applying for a payday loan, consider the following:

• Are you eligible for any lower-cost loans? You may be able to qualify for a cheaper source of financing. Learn more about payday loan alternatives.
• Will the repayments be manageable by you? Work out if the payday loan will be manageable with your current budget before proceeding. Failing to repay could result in late payment and NSF fees.
• What are you using the loan for? Payday loans are a band-aid solution and aren’t designed to fix long-term financial problems. If you have substantial financial problems, consider credit counselling.

How to apply for payday loans

While the application varies from lender to lender, these are the typical steps you’ll need to follow when filling out your application:

1. Click the green “Go to site” button above, or visit a lender’s website.
2. Provide information about yourself, including your contact details and Social Insurance Number.
3. Fill in your employment details or benefits information if you’re receiving government benefits such as a pension, EI or welfare.
4. Provide information about your monthly income, including how frequently you’re paid.
5. Enter your bank account details and agree to electronic transfers. Confirm the website is secure before providing this information.

You’ll need to read over a lender’s terms of service and privacy policy before submitting your application. The best payday loan providers will always have a secure online application and outline your loan’s final amount so you know exactly how much it will cost to borrow. Payday lenders are not allowed to charge more than the amount capped by provincial rules.

• Eligibility criteria for payday loans

  Eligibility differs between lenders and provinces; however, the following minimum criteria will usually need to be met:

  • Age. You must be the age of majority in your province or territory.
  • Residency. You’ll need to be a Canadian citizen or a permanent resident, with a valid Canadian address.
  • Income. You’ll need proof that you have some form of income, whether it’s employment income or government benefits.
  • Employment. Some lenders require you to be employed; however, some will accept you if you are self-employed or have government benefits or welfare.
  • Bank account. If you’re applying online you will need a working bank account. If you apply in person at a store, you may not need a bank account.

  Note: Remember that meeting the basic eligibility requirements does not guarantee payday loan approval.

• Required documents for payday loans

  • Valid ID with name and address
  • Valid phone number
  • Proof of income with employer’s name, address and phone number or government benefits or investment income
  • Net and gross income amounts
  • Bank account information (chequing account, routing and institution numbers)

  Note: Payday lenders may ask you to log into your bank account on a secure and encrypted online portal, but they won’t ask for your username and password directly.

Am I eligible for a payday loan if…

• I receive a pension?

If you’re retired or physically unable to work, you can still access a line of credit, personal loan or a payday loan. Some lenders consider your pension as income, so you may still be eligible depending on your financial situation and why you need the loan. Learn more about loans for retirees.

• I receive welfare payments?

Some payday lenders and institutions consider welfare payments as income, so you may be eligible. It generally depends on how much you earn, what kind of financial situation you’re in and what kind of payments you receive. Contact a lender to find out if you’re eligible. Learn more about payday loans for welfare recipients.

• I have bad credit?

It’s possible to get a payday loan with bad credit. When reviewing your application, lenders will place less emphasis on your credit and more on your income.

List of payday lenders that accept government benefits

What happens after I apply for a payday loan?

Once you submit your payday loan application, lenders will give you a decision within minutes. If you’re applying online, lenders can typically e-transfer payday loans within minutes or deposit the funds into your bank account within 1 business day or less. If you’re applying in-store, you can receive your funds via cash, cheque or e-transfer.

When it’s time to repay, your lender will withdraw the principal amount and any fees you owe directly from your bank account. Make sure you have enough money in your bank account on your due date to avoid penalties.

Keep in mind, you’re under no obligation to accept the terms of your payday loan offer. If you’ve read through the terms and conditions before signing, you can always decline the offered loan. If you’ve signed the contract, some provinces allow a cooling-off period (typically 2 days) where you can cancel the payday loan without penalty.

Do payday loan lenders check your credit score?

It depends. Some payday lenders do not check credit scores, while others do. Even if a payday lender checks your credit score, it doesn’t mean you’ll get rejected if you have poor credit, because payday lenders are more lenient than traditional lenders.

Reasons why you might be rejected

While your lender should provide a reason you weren’t approved for a payday loan, these are 4 of the most likely reasons:

• You aren’t employed or your income is too low.
• You already have a payday loan or recently borrowed one.
• You have too many current debts.
• You had errors on your application.

Can a payday loan improve my credit?

No. Payday loans don’t work like traditional loans because most lenders don’t report your payment history to the major credit bureaus. Payday loans are often considered a cash advance so they typically have no effect on your credit score if you pay them back on time.

Can a payday loan hurt my credit?

Yes, if you don’t make your payments. If you don’t pay off your loan, your payday lender can turn it over to a debt collection agency. Debt collection agencies typically report loans to credit bureaus. Collections show up on your report and can hurt your score.

Do I need a credit score to get a payday loan?

No, payday lenders are lenient and you don’t need a credit history to get approved.

Do payday lenders usually report to the credit bureaus?

No, payday lenders don’t report on-time repayments to the 2 major credit bureaus: TransUnion and Equifax. The most common way for your payday loan to be reported to a credit bureau is if it goes into collections.

How do I stay on top of my payday loan repayment?

Ask yourself these questions to make sure a payday loan is a feasible financial option that won’t cause you long-term problems:

• How much are my monthly bills? Write down and add up your rent or mortgage, utilities and other monthly expenses.
• How much are my living expenses? Consider how much you need for groceries, gas for your car, a few dollars for that morning coffee and other living expenses.
• How much of my paycheque do I have left? Subtract your monthly costs from your monthly salary after taxes. If you have enough left to cover your payday loan repayment, your loan is affordable.

Ultimately, you need to know that you can afford to repay your loan according to the terms, while still having enough cash to pay for your regular expenses. Otherwise, you may find yourself in a recurring debt situation.

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

If you don’t pay back a payday loan, you will be charged fees and you loan goes into default. Often, payday lenders hire debt collectors to try to collect on the loan, and when this happens, the collection agency can report your loan to the credit bureaus, which can negatively affect your credit score.

If you can’t make a payment on your payday loan, contact your creditor immediately to explain your situation. They might be willing to work with you to create a plan that helps you more easily pay back what you owe.

Can you renew payday loans?

Renewing your loan just once can double its cost and make it even more difficult to pay off in the future. For this reason, most provinces have made direct rollovers illegal. If you want to take out another loan, you’ll first have to pay off your current loan and then re-apply for a new loan.

Some lenders have benefits for repeat borrowers, such as increased borrowing amounts and quicker funding. However, don’t get into the habit of taking out payday loans. These are short-term solutions that often trigger a “debt spiral.” The Financial Consumer Agency of Canada reported that 7% of survey respondents take out another payday loan to repay their first one. Read our guide on how to get out of payday loans to learn practical ways to step out of that cycle of debt.

What can I use instead of a payday loan?

A payday loan can be an expensive way to get emergency financing. Consider these payday loan alternatives before you borrow:

• Provincial or federal aid. If you find yourself in need of consistent financial assistance, you might want to look into provincial or federal programs. Housing assistance and other aid could help reduce your bills so you can avoid payday loans.
• Friends and family. If you’re in a financial pinch, your friends and family may be willing to help. It doesn’t necessarily have to be a loan – giving you a ride while your car is in the shop or babysitting could help take the stress off your budget.
• Installment loans. These types of loans are for small amounts of money, but you pay back your repayments over time in installments as opposed to one lump sum like a payday loan. You can learn more about installment loans here.
• Credit union loans. Credit unions and other small banks sometimes offer small loans to their existing customers. Salary advances can be applied for and repaid on your next payday, often for more reasonable rates.
• Bank overdraft. If your bank account is in good standing, you may be eligible for a small, personal loan or overdraft. Contact your current bank to discuss your eligibility.
• Credit card cash advance. Getting a credit card cash advance can be much more affordable than paydays loans. you can usually get a cash advance up to a percentage of your credit limit. You’ll typically be charged anywhere from 24% to 36% for credit card cash advances.

Bottom line

A payday loan is best saved as a last resort when you’re facing an emergency financial situation. If you’ve weighed the alternatives and believe a payday loan is right for you, you can compare your payday loan options to find the best deal available to you.

Frequently asked questions about payday loans

• Can I pay off my payday loan early?

  Yes, it’s possible. Check the payday loan regulations of your province. In many provinces, lenders must allow you to pay off your loan early without any charges or penalties.

• Are there 3-month payday loans?

  No. In Canada, the maximum loan term allowed for payday loans is 62 days. Check out our short-term loans guide to learn about options available to you.