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Guide

How Payday Loans Work in Canada

A payday loan is a short-term loan of up to $1,500, repaid from your next pay within 62 days. In provinces that license payday lenders, the most a lender can charge is $14 for every $100 borrowed. Lenders must hold a provincial licence, and you usually have one or two business days to cancel at no cost.

Last reviewed by the Public Cash Services editorial team

What is a payday loan?

It is a small, unsecured loan meant to cover a gap until your next pay. Federal law defines it as a loan of $1,500 or less for 62 days or less. You give the lender a pre-authorized debit or a post-dated cheque, and the loan plus its fee comes out of your account on the due date.

How does the process work, step by step?

  1. You apply online or in a store with proof of income, a bank account and ID showing you are an adult resident of the province.
  2. The lender decides. Some lenders check your credit file and some do not; each sets its own policy.
  3. You sign an agreement that states the amount, the fee in dollars, the due date and your right to cancel.
  4. You receive the money, typically by e-Transfer, direct deposit or cash.
  5. You repay the loan and the fee on the due date. In Alberta, repayment is spread over instalments.

What does it cost?

Since January 1, 2025 the maximum is $14 per $100 borrowed in every province with payday-loan rules. Borrow $500 and the fee is up to $70, so $570 is due. Over a 14-day term that is equal to roughly 365% a year, which is why a payday loan is among the most expensive ways to borrow.

What rules protect borrowers?

Licence
The lender must be licensed in your province, including online lenders.
Cancellation
You can cancel within a short cooling-off period — two business days in Ontario, British Columbia and Alberta — by returning the money, with no fee.
No rollovers
A lender cannot extend the loan for another fee or lend you more to repay the first loan.
Failed payment
The lender may charge a one-time fee if your cheque or debit is returned. Your bank may charge its own fee as well.

Is a payday loan right for a recurring shortfall?

No. It is built for a single, short gap. If you are short every month, the fee makes next month harder. Look at lower-cost alternatives or speak with a non-profit credit counsellor first.

Quick answers

Can I get a payday loan with bad credit?

Possibly. Payday lenders weigh income and banking history heavily, and each one sets its own credit-check policy. Approval is always the lender’s decision and is never guaranteed.

How fast is the money sent?

It depends on the lender and your bank. Many lenders state same-day e-Transfer once an application is approved, but timing is not something any comparison site can promise.

Sources

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