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I need to take a payday loan to cover my bills because of the COVID-19 situation. What should I know before I sign a payday loan contract?

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I need to take a payday loan to cover my bills because of the COVID-19 situation. What should I know before I sign a payday loan contract?
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I need to take a payday loan to cover my bills because of the COVID-19 situation. What should I know before I sign a payday loan contract?
Reviewed: 
March 27, 2020
Answer

In Ontario, the most money you can borrow in a payday loan is $1,500. You must repay the loan within 62 days, which is about 2 months.

Before you borrow, you should understand how much it could cost you. Payday lenders must have a sign in their lobby and on their website that explains how much it costs to borrow $500. For example, if you’re charged $15 for every $100 borrowed and you don’t repay the loan on time, you could pay interest of up to 60% as an annual rate.

Payday lenders must be licensed by the province and follow strict rules. The law says that lenders can’t:

  • charge more than $15 in fees for every $100 you borrow,
  • lend you more than half of your net monthly income in any one loan, or
  • ask for collateral or a guarantor for the loan.

If you decide to take a payday loan, the lender must give you a copy of the agreement after you sign it. You have a 2 day “cooling off” period so if you change your mind, you can cancel the agreement and return the money you borrowed. You don’t have to give a reason.

Lenders can ask for proof of your regular income, like a pay stub or pension statement. They might confirm your regular income with your employer. They can also ask for proof that you have a bank account and a home address.

For more information about payday loans, visit Steps to Justice.

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