What is a payday loan? Do I have other options?Updated November 11

A allows you to quickly borrow cash that you promise to repay when you get your next paycheque or other regular income payment.

In Ontario, most payday loans are for $1,500. If you borrow more than $1,500, then the maximum amount of that a lender can charge you is lower. Payday lenders can't give you more than 50% of your net monthly pay in a single loan.

You must agree to repay the loan in a short period of time, usually 14-28 days. The longest time you can get a payday loan for is 62 days, which is about 2 months. If your loan is for longer than this, then the lender can't charge you as much interest as they normally would.

Most lenders don't do checks before giving a payday loan. But they usually ask you for:

  • proof that you have been employed for 3 months in a row, or proof that you receive enough Ontario Works or Ontario Disability Support Program payments to repay the loan
  • proof of your address, for example a utility bill, and
  • your chequing account details.

If the payday lender approves you for a loan, you'll have to sign a . In this agreement, you promise to repay all the money plus interest and fees.

Payday lenders charge much higher interest rates and fees than banks, credit unions, or credit cards.

You can't get a new loan until your first one is paid off.

Usually payday loans have to be paid back all at once at the end of the term of the loan. But if the loan you're applying for is your third one or more within a 63‑day period, the lender must offer you an extended payment plan.

Make sure you understand how payday loans work before you sign a loan agreement. For example, it's important to know:

  • the amount you're borrowing
  • how much you need to repay
  • how many days you have to repay the loan
  • how you repay the loan
  • whether you can cancel the loan agreement

Before you take a payday loan, think about other ways to solve your money problems. For example, you can talk to a non-profit credit counsellor to make a plan for paying your and expenses. Or, if you need money for a short period of time, using a credit card can cost less than a payday loan.

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