As a Canadian, when you need money fast and you can’t go to your bank to receive a loan, payday lenders are typically the answer. A payday loan is a short-term loan that’s high-risk for the lender. In Canada, the maximum payday loan you can borrow is $1,500. When a loan is provided, the understanding is the applicant will pay the loan back from their next paycheque.

Every year, more than 2 million Canadians take a loan from a payday lender. These services are heavily regulated in Canada, with interest rates and fees capped province-by-province. Payday loans in Canada work similarly to how they do in other countries, though they differ slightly in miniscule ways.

How do payday loans work in Canada exactly? Here are some details about how payday loans work in this country:

1. Who uses payday loans?

Many Canadians use payday loans, particularly people with less than optimal credit ratings. That’s because a payday lender usually does not check your credit rating or credit report when considering approval. This is why they have become so popular. They use other means to judge a person’s ability to pay back a loan. The payday loan system in Canada makes them easy to qualify for and accessible to Canadians who do not have the means of borrowing from other sources.

2. How your income impacts payday loans

Though the maximum allowed for a payday loan is $1,500, this doesn’t mean you can receive $1,500. The amount you qualify for depends heavily on the income you have coming in. If an applicant does not appear to have the means to pay back a payday loan in full, they will be approved for a smaller amount. Most Canadians will not qualify for the maximum allowed amount.

3. What you need to apply for a payday loan in Canada

Payday loans can be applied in-store or online. Though every payday lender is different, they generally all require proof of regular income, access to your bank account, and to confirm your address.

4. How much are payday loan fees?

A payday loan is given with a fee attached. This fee is usually cost-per-$100. For example, in Ontario, a payday loan fee is $15 per every $100 you borrow. In BC and Alberta, it is also $15. Comparatively, in Saskatchewan, it is $17. The most expensive payday loan fees in Canada are Prince Edward Island’s where the cost per $100 is $25.

5. How do you get money from a payday loan service?

Some payday lenders will provide money to you in cash while others will deposit the money directly into your bank account. Ask your lender what options are available to you in receiving the amount you’re approved for.

6. Can you cancel a payday loan?

In most provinces in Canada, there is a regulated ‘cooling off’ period. This is usually 24-48 hours after a loan has been approved wherein you are allowed to cancel it with no explanation and without paying any fees. If your province preserves this right, this is the only way you can successfully cancel a payday loan while avoiding paying any fees.

7. How do you repay a payday loan?

A payday lender will procure payment through pre-authorized debit. An agreed-upon date is given and the total loan amount including any fees are withdrawn on that day from your bank account. It is imperative that the funds are there to repay the loan as not to incur an NSF fee and/or additional interest and fees.

8. How long do you have to pay back a payday loan?

Though this is regulated province-by-province, payday lenders in Alberta, BC, Manitoba, New Brunswick, and Ontario require repayment to occur within 62 days. During that time, a payday lender will add on further fees and interest which will increase the total amount owing.

9. What happens if you don’t pay back a payday loan?

If you don’t pay back a payday loan in Canada, after a certain period of time, a payday loan service will likely pass off your case to a collection agency. At that stage, you can expect a payday loan to show up on your credit report as a payment owing. It is also within a collection agency or payday lender’s rights to sue you for the debt, seize your property, or have your paycheques garnished for the funds.

10. What are the rules for payday lenders in my province?

It can be difficult talking payday loans Canada-wide because the rules are very province-specific. Alberta, British Columbia, Manitoba, New Brunswick, Nova Scotia, Ontario, and Saskatchewan are the areas where payday lenders are most heavily regulated. The regulatory landscape is always changing on a year-by-year basis with new proposals and consumer protections coming into play.

For information on what rules and regulations apply to payday lenders in your province, the information is available on most provincial government websites. If you have a complaint to make, contacting your province’s consumer protection office is how to do it.

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