How much does a payday loan cost in Canada?
A payday loan is built to feel small: a flat fee, no credit check, money in your account today. The fee is the trap, because it is charged on a loan that lasts only until your next paycheque. This guide shows the real cost in dollars and as a yearly rate, which provinces cap it, what happens if a payment bounces, and the options FCAC says usually cost less.
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Payday loan cost calculator
What will this payday loan cost?
| Way to borrow | Cost for this amount and time |
|---|
Comparison rows use FCAC's own assumptions: a line of credit with a $5 fee and 8% a year, overdraft protection with a $5 fee and 21%, and a credit card cash advance with a $5 fee and 23%, with interest charged for the days borrowed (rate × days ÷ 365). Your own rates and fees will differ. The yearly rate shown for the payday loan is simple, not compounded: cost ÷ amount × 365 ÷ days.
What a payday loan is
FCAC describes a payday loan as a short-term loan with high fees, also called a high-cost loan or high-cost credit. The basics:
- Small and short. You may borrow up to $1,500 and have up to 62 days to pay it back, though most are due on your next payday.
- A flat fee, not interest. If you pay on time you pay a fee instead of interest. That is why the cost looks small until you turn it into a yearly rate.
- Easy to get. You may qualify without a credit check. Lenders usually want proof of regular income, a bank account and a permanent address.
- Repaid automatically. Lenders may ask you to sign a pre-authorized debit so they can pull the payment from your account, or to give a post-dated cheque for the full amount including fees.
Payday lenders are private companies operating in stores and online, and they must be licensed in the province where they do business. FCAC warns to be careful with online lenders based outside Canada, because problems with them can be hard to resolve.
The $14 per $100 cap, province by province
Each province sets its own payday loan rules; the territories do not have specific rules. FCAC lists nine provinces that regulate payday lending fees and penalties: Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island and Saskatchewan.
| Where you live | Maximum cost of borrowing | Bounced payment fee |
|---|---|---|
| The nine provinces above | $14 for each $100 you borrow | A one-time fee of up to $20 for a dishonoured cheque |
| Other provinces and the territories | Limited by the criminal interest rate of 35% a year, about $1.35 per $100 for two weeks | Check with your provincial or territorial consumer affairs office |
FCAC's own figures show why the cap still leaves payday loans expensive: $14 per $100 for two weeks is the same as an annual interest rate of roughly 365%. A credit card at 23% looks costly until you put the two side by side.
Worked example: $500 for two weeks
Sam needs $500 to cover a car repair until payday in 14 days, and lives in a province with the $14 cap.
- Payday loan: $500 ÷ 100 × $14 = $70. Sam repays $570.
- Line of credit (FCAC's $5 fee and 8%): $500 × 8% × 14 ÷ 365 = $1.53, plus $5 = $6.53.
- Overdraft protection ($5 fee and 21%): $500 × 21% × 14 ÷ 365 = $4.03, plus $5 = $9.03.
- Credit card cash advance ($5 fee and 23%): $500 × 23% × 14 ÷ 365 = $4.41, plus $5 = $9.41.
The payday loan costs about seven times the most expensive alternative here. The bigger risk is repetition. If Sam repays and borrows $500 again every payday for 12 weeks, that is six loans and 6 × $70 = $420 in fees, without ever borrowing more than $500 at a time. FCAC calls this the debt cycle. Our guide to credit card cash advance fees breaks down that option in detail.
If you cannot pay it back on time
FCAC lists what can happen, depending on your province's law:
- If the pre-authorized payment bounces, the payday lender may charge a fee, and your bank may charge an NSF fee too. Our overdraft vs NSF guide explains how bank fees work when a payment fails.
- The lender may charge interest on what is still owing, so the total keeps growing.
- The debt may go to a collection agency and appear on your credit report.
- The lender or a collection agency may sue you for the debt.
FCAC's own illustration: a $300 loan for two weeks costs $42, so you owe $342. Miss the payment and a $20 penalty brings it to $362, before any bank fee. Provincial laws also set when and how often a lender or collector can contact you.
Rules that protect you
- No rollovers in most provinces. FCAC says that in most provinces a payday lender cannot extend or roll over your loan, which usually means it cannot push back the due date and charge you a new fee.
- No wage assignments. Provincial laws prevent payday lenders from asking you to sign a form that sends your wages straight to them.
- A written agreement. It typically shows the amount borrowed, the fees, the payment schedule and the due date. Read it before you sign and ask about anything unclear.
- A licence. Check that the lender is licensed with your provincial or territorial consumer affairs office before you borrow.
Options people compare
FCAC suggests looking at these before a payday loan. They are options to weigh against your situation, not recommendations:
| Option | FCAC example cost on $300 for 14 days | Watch for |
|---|---|---|
| Line of credit | $5.92 | Needs approval; easy access can grow debt |
| Overdraft protection | $7.42 | Monthly or per-use fees on top of interest |
| Credit card cash advance | $7.65 | Interest usually starts the same day, plus a fee |
| Ask for more time on a bill | Often $0 | Get the new due date in writing |
| Pay advance from your employer | Often $0 | Comes out of your next pay |
| Loan from family or friends | Often $0 | Agree on repayment up front |
| Payday loan | $42.00 | About 365% a year; repeat borrowing |
If payday loans have become a habit, FCAC points to an accredited credit counsellor, a financial advisor or a licensed insolvency trustee, whose advice is often free. Building even a small emergency fund is what breaks the cycle over time, and more calculators are on the tools page.
How to check the real cost of a payday loan
- Write down the amount you need and the exact number of days until it is due.
- Multiply the amount by the cost per $100 the lender quotes; in regulated provinces it cannot exceed $14.
- Turn the fee into a yearly rate: fee divided by amount, times 365, divided by the number of days.
- Price the same amount on a line of credit, overdraft or cash advance using your own rates and fees.
- Check the lender is licensed with your provincial or territorial consumer affairs office.
- Read the agreement for the due date, fees and the penalty for a bounced payment.
- Make sure the payment will clear on the due date, so you avoid the lender fee and an NSF fee.
Questions people ask
What is the maximum a payday lender can charge in Canada?
In Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island and Saskatchewan, FCAC says the maximum cost of borrowing is $14 for each $100 you borrow. In other provinces and the territories, the limit is the criminal interest rate of 35% a year.
How much does a $300 payday loan cost?
At $14 per $100, a $300 payday loan costs $42, so you repay $342. FCAC says that is the same as an annual interest rate of about 365% for a two-week loan.
How much can I borrow with a payday loan?
FCAC says you may borrow up to $1,500 and may have up to 62 days to pay it back.
What happens if I miss a payday loan payment?
The lender may charge a fee, which is capped at $20 for a dishonoured cheque in the regulated provinces, and your bank may charge an NSF fee. The lender may charge interest on the amount owing, send the debt to collections, which can appear on your credit report, or sue you.
Can a payday lender roll over my loan?
In most provinces, no. FCAC says a payday lender usually cannot extend or roll over your loan by pushing back the due date and charging a new fee.
Do payday loans check your credit?
You may qualify without a credit check. Lenders usually ask for proof of regular income, a bank account and a permanent address, and may require a pre-authorized debit or a post-dated cheque.
What is cheaper than a payday loan?
FCAC lists a line of credit, overdraft protection and a credit card cash advance as usually less expensive, and also suggests asking for more time on bills, a pay advance from your employer or a loan from family or friends.
Looni reads your statements and flags fees, bounced payments and charges that repeat, with the line on the statement as proof. Read-only, no advice.
Sources
Financial Consumer Agency of Canada, Payday loans (definition, up to $1,500 and 62 days, application requirements, pre-authorized debit or post-dated cheque, the nine regulating provinces, $14 per $100 maximum, $20 dishonoured cheque fee, 35% criminal rate and about $1.35 per $100 for two weeks, the $300 for 14 days comparison of $5.92, $7.42, $7.65 and $42 with its assumptions, the $342 and $362 illustration, rollover and wage assignment rules, consequences of late payment, options to consider and where to get help) and Pre-authorized debits. The $500 example and the repeat-borrowing figure use FCAC's assumptions; the arithmetic is ours.