Payday loan statistics in Canada for 2025

Insights into a loan with a predatory reputation, including how much it costs, why it's used and how often

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By

Leanne Escobal

Edited by

Angus Kidman

Updated

Fact checked

You’ve probably seen a payday loan storefront or online ad for quick cash loans at some point in your life. These loans are usually marketed by lenders as a remedy for unexpected financial emergencies. The catch? Payday loans come with exorbitant rates, which can ultimately create more financial strain than relief for Canadians.

Payday loan statistics: Highlights

  • As of January 1, 2025, payday loans in Canada cost $14 for every $100 borrowed.
  • Payday loans are not as popular as other loan options in Canada. Only 4% of Canadians plan to get a payday loan in the next 3 months.
  • For a $1,000 emergency expense, payday loans are among the least preferred options. Only 3% of Canadians would choose a payday loan, equal to those considering wage advances.
  • Nearly half of Canadians (48%) are unlikely to apply to alternative lenders, including payday lenders. Only 18% are likely to consider such options, indicating a preference for traditional lenders.
  • The primary reasons Canadians use payday loans are for necessary expenses. In Q1 2023, 13% used them for groceries, 11% for electricity bills, and 8% for gas bills. In Q2 2023, 12% used them for car loan payments, 8% for insurance, and 7% for child care expenses.
  • Inflation since the height of COVID has impacted Canadians’ reliance on payday loans. This has led to increased use of payday loans for standard living costs.
  • Less than 1 in 5 Canadians (18%) don’t know or don’t see any risks with payday loans.

What exactly are payday loans?

Payday loans range from $100 to $1,500 and must be repaid in full on the borrower’s next payday. They’re designed to be easy to get. You can apply for one in less than 10 minutes, get instant approval, and either receive an e-transfer within minutes if you’re applying online or walk out with cash if you’re applying in person. You can get a payday loan if you have a low income, bad credit or both. Popular payday lenders include iCash, Cash Money and Money Mart.

The combination of instant funding and lenient eligibility requirements make payday loans an appealing option for people who need money urgently. However, their steep interest rates, short repayment terms and target market have led to a reputation for predatory lending.

Current payday loan interest rates in Canada

As of January 1, 2025, payday loans across Canada cost $14 for every $100 borrowed, based on a new regulation that was first introduced in the 2023 federal budget to crack down on predatory lending. The new borrowing fee is $0 to $3 cheaper for every $100 borrowed, depending on your province.

Despite the lower fee, payday loans are still extremely expensive, with annual percentage rates (APRs) reaching triple digits.

Cost example: $500 payday loan in Ontario

Here’s an example of how much a $500 payday loan would cost, based on previous and current regulations, in Canada’s most populated province.

December 31, 2024January 1, 2025
Loan amount
$500
$500
Loan term
14 days
14 days
Borrowing fee
$15 for every $100 borrowed
$14 for every $100 borrowed
Repayment amount
$575
$570
APR
391%
365%

Do Canadians commonly use payday loans?

Thankfully, payday loans are not as popular as other cheaper loan options. In the Finder: Consumer Sentiment Survey January 2025, payday loans ranked as the sixth most favoured answer (4%) for Canadians. Credit cards (12%) and lines of credit (11%) topped the list of loan products.

Cash advance apps, which are a payday loan alternative that first launched in Canada in 2021, ranked as the fifth most favoured answer (5%), alongside RRSP/investment loans (5%) and personal loans (5%).

Do Canadians prefer payday loans for emergencies?

Payday loans are advertised as easy financing solutions to unexpected expenses. But when we asked Canadians what was their first source to pay for a $1,000 emergency expense, payday loans fortunately remained unpopular, ranking second from the bottom (3%), equal to wage advances (3%).

Are Canadians open to nontraditional lenders, such as payday lenders?

A growing number of alternative lenders are establishing their presence in Canada. According to Research and Markets, alternative lending in Canada is expected to record a compound annual growth rate of 17.9% from 2024 to 2028.

However, almost half of respondents (48%) from the Finder: Consumer Sentiment Survey January 2025 said they were unlikely or very unlikely to apply to an alternative lender to see its offer. Only 18% said they were likely or very likely, which suggests that most Canadians still prefer to apply to the familiar: financial institutions, such as the Big Six. This is not surprising, given that alternative lending focuses primarily on non-prime borrowers, who account for approximately 15% of Canadians.

What do Canadians need payday loans for?

Back in 2016, the Financial Consumer Agency of Canada (FCAC) conducted a national survey of payday loan users. A large majority of respondents (86%) took out a payday loan for necessary expenses, whether those were expected (41%), such as rent or utility bills, or unexpected (45%), such as car repairs.

Seven years later, Finder’s consumer sentiment surveys showed that the reason for payday loans had not changed: borrowers still needed them for necessary expenses. According to the Finder: Consumer Sentiment Survey Q1 2023, groceries were the number one reason why Canadians turned to a payday loan.

Green shopping basket
  1. Groceries (13%)
  2. Electricity bill (11%)
  3. Gas (utility) bill (8%)
  4. Water bill (7%), phone bill (7%), internet bill (7%)
  5. Car repair (5%), mortgage (5%), rent (5%)

The reasons shifted in the Finder: Consumer Sentiment Survey Q2 2023, with car loan payment as the number one reason.

Purple car
  1. Car loan payment (12%)
  2. Insurance, e.g. car, home, life and health (8%)
  3. Child care expenses (7%)
  4. Groceries (6%)
  5. Car repair (5%), electricity bill (5%), expected travel expenses, e.g. fuel and bus fares (5%), rent (5%)

In the Finder: Consumer Sentiment Survey Q3 2023, groceries once again became the top reason.

Pink shopping basket
  1. Groceries (10%)
  2. Car repair (7%), home repair (7%), rent (7%), car loan payment (7%)
  3. Electricity bill (6%)
  4. Internet bill (5%), insurance (5%)
  5. Gas (utility) bill (4%), cable TV bill (4%), mortgage (4%), emergency travel expenses (4%), medical/dental emergency (4%), education expenses (4%)

While the top five reasons varied every quarter, the underlying theme was that Canadians took out payday loans to cover unavoidable expenses. What was especially troubling about the 2023 survey results was that Canadians were predominantly using payday loans for standard living costs rather than unexpected emergencies.

A noteworthy but unsurprising expense was groceries. Since the height of COVID, inflation has been an enduring topic and major concern for Canadians. The Consumer Price Index (CPI) saw a 3.9% increase in 2023 and a 6.8% increase in 2022–a 40-year high for the latter. A $100 basket of goods in 2016 would cost $121.37 in 2023–an increase of 21.37%.

In contrast, in the FCAC’s 2016 survey, there was a more even distribution between unexpected and expected expenses: 45% of respondents relied on payday loans for unexpected expenses, while 41% used them for expected expenses.

Do Canadians understand why payday loans are risky?

According to the FCAC, less than half of payday loan users (43%) understood that a payday loan was more expensive than other alternatives.

In the Finder: Consumer Sentiment Survey January 2024, less than 1 in 5 Canadians (18%) didn’t know or didn’t see any risks with payday loans.

Do Canadians use payday loans repeatedly?

One of the biggest risks of payday loans is getting trapped in a cycle of debt. When a borrower repays a payday loan in full on their next payday, they’re left with less money in their bank account to pay for other debts, bills and expenses. If there isn’t enough money to tide them over until their next payday, which is often the case for people who resort to payday loans, they may be compelled to take out another payday loan.

In the FCAC’s 2016 survey, the majority of payday loan users (at least 60%) took out two or more payday loans in the last three years: 37% percent reported two to five payday loans, 23% reported taking out six or more loans and 11% preferred not to specify.

In Finder’s Q1, Q2 and Q3 2023 surveys, between 9% and 30% of Canadians took out two or more payday loans in the last three months.

The future of payday loans: What do experts say?Blue spyglass

As of January 1, 2025, the maximum interest rate allowed in Canada decreased from 47% APR to 35% APR, with payday loans excluded. Experts in lending say that the decrease in the maximum rate will cause lenders of subprime personal loans to be stricter with their eligibility requirements. As a result, more Canadians will face personal loan denials, leading them to payday loans instead. In 2024 and at the beginning of 2025, we saw lenders of subprime personal loans enter the payday loan and cash advance spaces, such as Cashco and Magical Credit.

The payday loan industry is likely to see growth in 2025 and beyond.

Expert insight

"The CLA opposes the lowering of the maximum allowable rate of interest because it would result in unintended consequences for Canadian borrowers. Analysis from our Risk Roundtable indicates that such a policy change may adversely affect up to 80% of the non-prime and unscorable segment—between 4.8-6.7 million individuals—by curtailing or eliminating their access to credit. Lacking viable alternatives, many of these borrowers would be driven toward payday lenders or unregulated entities, exacerbating financial insecurity and deepening their economic vulnerability."

Canadian Lenders Association
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To make sure you get accurate and helpful information, this guide has been edited by Angus Kidman as part of our fact-checking process.
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Written by

Publisher

Leanne Escobal is a publisher for Finder. She has spent over 12 years working with financial products and services, specializing in content and marketing. Leanne has completed the Canadian securities course (CSC®) as well as the personal lending and mortgages course by the Canadian Securities Institute. She has a Bachelor of Arts (Honours) in English literature and creative writing from Western University. See full bio

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