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Payday cash loans are very common across Canada. A payday loan allows you to borrow a small amount of money (anything from a few hundred dollars to $1500) via a short term loan, which typically must be paid back within a few weeks, from your pay. Because of this structure, they are often referred to as payday advance loans. Interest rates on payday loans can be high, but the good news is that you can gain approval for a payday loan very quickly, even if you have bad credit, and get your cash the same day. And online payday lenders mean you can do all this from the comfort of your own home. This makes these loans ideal for those seeking an emergency influx of cash.
At Smarter Loans, we’ve compiled a list of the most reputable payday lenders in Canada, which you can see below. Click “Apply Now” to get started with one of these lenders, or pre-apply with Smarter Loans and we will find the most suitable payday lender for your needs. And read on to find out everything you need to know about payday loans and payday lenders in Canada.
We can help connect you with the top loan payday loan providers in Canada.
A payday loan is an unsecured, short term loan available to retail consumers. The loan relies on a repayment agreement signed at the loan’s origination, which is activated when the borrower receives his/her next pay.
All things being equal, payday loans generally have higher interest rates than any other type of loan, because of their unsecured and short term nature. Lenders assume a greater risk when providing payday loans, and so can charge higher interest to compensate for this risk.
The principal amount of a payday loan is typically smaller than with traditional loans (generally in the $500 – $1000 range, with an upper limit set by the federal regulator). And as mentioned above, they are designed to be very short term in nature – the shortest term loans available. They are mostly structured to be repaid in a single repayment, via a post-dated cheque or pre-authorized electronic debit for the full balance. Hence the name: they are cash advances against future pay.
Unlike with other loans, a credit check is not necessary when you apply for a payday loan; the only really important factor is income. Crucially, this does not necessarily have to be employment income; it can be income from benefits. What matters is that you’ll have money coming in to pay off the loan.
Across all of Canada’s provinces and territories, payday loans are available at retail stores or online, and are provided by non-bank institutions that must be registered with the Financial and Consumer Services Commission.
Source: Payday Loan Statistics from Government of Canada
Payday loans are sometimes considered a debt trap, charging those in vulnerable financial positions high fees for quick cash, with lenders acting in an unscrupulous manner. But the payday loan market in Canada is actually subject to more regulation than in many other countries, and as you’ll see below, much of this regulation aims to protect consumers from disreputable practices.
That isn’t to say that payday loans aren’t an expensive way to access fast cash, or that another form of loan might not better suit your needs, but as long as you understand the risks and rewards of a pay based quick cash loan, they can prove very useful in certain situations.
Despite their high fees, a payday lender can offer the following benefits:
The steps to get a payday loan are trivial: the borrower must provide a limited amount of financial information, including proof of regular income, bank account details, and an address. Once the application is complete, the loan can be approved and money transferred into your bank account within just a few hours. 90% of payday loan users cite convenience as a primary reason for their use.
Conventional loans with longer timelines reflect their intended usage and size, and in order to access them you need to be able to prove income over an extended period of time. But as payday loans have significantly shorter timeframes, you only need to show that you have income now; past employment gaps, changes in pay, and financial changes do not factor in.
Most payday loans are accessible to anyone over the age of 18 with consistent, verifiable income.
Unlike traditional loans that require collateral or a credit check, these loans are based solely on the cash flows and expected pay of the borrower. 27% of payday loan borrowers have been denied approval by a bank or credit union.
Many conventional retail loans are offered for a specific purpose, defined from the outset. An auto loan can only be used to purchase an automobile, and a mortgage can only be used to finance a residential or commercial property.
Cash from payday loans, however, can be spent on anything – any discretionary or staple expense deemed fit by the borrower. You can borrow money for any reason.
Payday loans are available to anyone with an internet connection. All processes and procedures can be completed online, making them very accessible. This doesn’t mean you have to apply online though; many lenders have a brick-and-mortar store, so you can apply in store instead if you prefer. But you have the option to do either.
As with any form of loan, there are downsides to borrowing money via a payday loan. These include:
Depending on the duration that the loan is obtained for and the interest rate charged by the lender, payday loans can be an expensive form of financing compared to other short-term loans and/or credit cards. The table below illustrates this concept. Assuming $500 borrowed for 2 weeks, interest payments are as follows:
|Payday Loan||Credit Card|
|$75 at a 15% rate||~$8 assuming a 23% APR|
Payday loans are intended for short term use; it is crucial to know that if a payday loan is held for longer than intended, it can quickly become extremely expensive, contributing to financial difficulties and making it impossible to repay the loan in full.
Borrowers can find themselves in a cycle of debt, where each paycheque goes towards the repayment of existing loans, leaving little for the operating expenses they took out the loan for. As a consequence, extensions of these loans mean even more interest and even more debt, making it even harder to pay back what you’ve borrowed. This is known as a debt trap, and it is an especially high risk for those who need emergency cash, whatever the cost.
Non-sophisticated borrowers may be susceptible to lending practices that are intended to be unfavourable to the borrower; there may be contract loopholes or misleading marketing materials to contend with. It is therefore critical for consumers to find registered institutions that are vetted by regulatory authorities.
To learn more about criminal rates of interest in Canada, please visit the Government of Canada website.
As mentioned above, payday lenders are regulated and have to comply with specific requirements in order to operate. These requirements were created to protect Canadian consumers, and include:
Payday loans are governed by the Payday Loans Act, 2008, which was initiated to protect borrowers and enshrine certain rights. Most pertinent amongst the Act’s tenets are the following points:
A failure to meet the terms of a payday loan agreement cannot result in the lender pursuing one or more of the following actions:
Before obtaining cash via a payday loan, the following should be defined and reviewed in detail:
Before borrowing via a payday loan, it is important to understand your financial needs, and whether they justify the higher interest payments that come with a payday loan. For debts that can be negotiated, it could be worthwhile to speak to the creditors directly to restructure the outstanding amounts and/or develop a specialized repayment plan, if that option is available.
The unsecured nature of payday loans means that while the borrower can avoid asset seizure in the event of default, interest rates can become extravagantly high. This is even before penalties and other fees come into consideration. It is therefore important to read contract documents carefully to understand the consequences of missed/late payments.
Besides payday loans, credit unions or credit card companies also offer short term funding options. Again, if that option is available, it may be worthwhile to compare costs, before deciding upon a final option. Fast cash is attractive, but always take into account the long term cost.
The length of the loan is a major consideration. If the borrower is in immediate need of cash and payday is still a few weeks away, a payday loan is a better option than for someone whose payday is a few days away and/or does not have immediate cash needs.
The amount of cash being borrowed should be studied closely prior to receiving the cash, as each incremental dollar yields a higher interest payment. In a facility such as a payday loan, this gets magnified due to the significantly higher interest rate charged.
The most comparable alternative to a payday loan, wherein borrowers acquire short term cash to assist with immediate expenses, is a cash advance. There are two types of cash advances:
Type I is pretty synonymous with a payday loan; the lender provides a fixed principal amount that is tied to the borrower’s income and is intended to be repaid on the borrower’s next payday.
Type II is structured as a line of credit, where the cash advance offered is dependent on the unused credit limit on the borrower’s credit card, rather than on income. This type of cash advance is provided directly by the credit card company (not the issuer), and receives the same type of treatment as any other ordinary purchase made with a credit card.
Depending on the borrower’s financial situation and credit card features, it may or may not be advantageous to use a credit card cash advance. Some key factors for borrowers to consider if choosing between these two options are: current credit rating, and credit card contract terms. In some cases, credit card companies charge higher rates on cash advances than on ordinary credit purchases, so it is important for the borrower to understand the rate differential, and choose accordingly.
There are many ways to access cash online, and many options have competitive interest rates and terms, so it’s smart to educate yourself about all of your options before choosing to go with a payday lender. Research by the Government of Canada found that 57% of payday loan users were aware of their high costs versus their alternatives.
A major reason many turn to payday loans is that they are unable to access cash by any other means; 65% of payday loan borrowers do not have access to a credit card. But if this is you, you should know that there are many financing options available to those who have been turned away by a bank or credit union. Online lenders offer loans and credit products to new Canadians, those with bad credit, and those who don’t qualify for more traditional financing. Many of these lenders are accessible from this website, and you may be able to qualify for their products online and at a lower interest rate than with a payday lender.
Below you’ll find a list of reputable companies that offer personal and installment online loans. These loans can be for small amounts, and come with much lower interest rates than payday loans. Take a look to compare your options, including products offered, interest rates, terms, qualifications and even reviews from other customers. When you’ve found a loan company you like, hit “Apply Now” next to the lender to start the application process.
Finally, it’s worth noting that research has shown that even those with high income and savings turn to fast cash loans to cope with unexpected expenses. This is believed to be an education issue; people would rather keep savings accounts ring-fenced, and take on new debt in the form of a payday loan, than dip into rainy day funds. However the maths on this does not add up, as new debt costs more than using savings, and can potentially affect your credit rating and overall financial health too. The best advice states that it is better to use savings when encountering an unexpected expense, and then rebuild them slowly from your monthly pay, than it is to take on unnecessary debt.
Yes, getting a payday loan in Canada is simple, because you can apply online. Online options are very convenient, and once funds are approved, cash will be deposited into your bank account via a transfer. However you can also get them in store; there are lots of payday lenders that have stores all over Canada.
Borrowers must be at least 18 years old, have a steady verifiable source of income, access to a bank account, and a permanent address.
Yes. Payday loans are a very useful way to access cash for people that have bad credit and can’t get approval anywhere else. They are also intended for people who want to avoid a credit check, for any reason. Payday loans should however still be your last loan option, because they are expensive.
Lenders typically approve payday loans within a day, and sometimes even within a few hours of submitting your application form. Cash is usually automatically deposited into your account via a bank transfer. This makes a payday loan one of the fastest and most convenient ways to borrow money.
Yes. You will need access to a bank account, and to provide that bank account’s details when applying for a payday loan. This is because the payday lender will transfer cash into your account. Those without a bank account will struggle to secure a loan of any kind.
Payday loans and payday lenders are subject to regulation aimed to making them as safe as possible for consumers. However, this doesn’t mean there aren’t risks. You should always exercise caution when using any website to input private, personal or financial data, and ensure your connection and device are secure to prevent this information from being compromised when you apply online to a payday lender.
In addition to data security risks, if using a payday loan you should know that payday lenders charge the highest interest rate of any type of lender, meaning that payday loans are the most expensive way to borrow money.
Yes, potentially. If you don’t repay your loan on time, you will initially be subject to fees and interest; this interest will increase as time passes. Eventually, the lender may decide to pursue payment via a collection agency, or may decide to sue you for the debt. You can avoid the threat of a collection agency by making sure you can pay back any money you borrow.
That depends on the loan agreement you signed when taking out the loan. Most who borrow money via a payday lender do so with the intention of paying the money back within a few weeks. If you extend your loan beyond this, your loan may end up as a debt trap, requiring you to borrow more money to cover its cost.
No. While you need to be able to prove your pay when applying for a payday loan (in order for the payday lender to verify you’ll be able to repay the loan), your employer does not need to know about the loan, and the payday lender should in no circumstances inform your employer. It is illegal for payday lenders to take payment in the form of automated paycheque deductions.
Your cash is typically delivered to your bank account within a day, but you could receive a deposit within just a few hours. And if you have online banking, this means that you can access money borrowed via this type of loan extremely quickly.
That depends on which payday lender you go to, how much money you borrow, and for how long. Interest charges usually make up the majority of the cost, though there are fees to account for too. Make sure you understand the entire cost of your intended borrowing before agreeing to it.
Most payday loans are intended to be repaid in one lump-sum, so their cost is often advertised as a ‘flat fee’ rather than as an interest rate. You’re likely to see a lender state something along the lines of “$15 per $100 borrowed” – but you should know that this is only if you pay back the cash on time, and does not account for the high fees, interest and other factors that can increase cost if you fail to repay on time.
No, not in the same way as you can as an individual. If your business needs to borrow money and is struggling to find a lender it can qualify with, the best option is usually a business cash advance. This short term financing option relies on the business’s ability to pay back the money borrowed (plus interest charges and fees) with expected business income. For other borrowing options for your business, take a look at our business financing page.
No, as even if you repay all of the money you borrowed on time, most payday lenders do not report payments to credit bureaus, so positive payment history will not be taken into account in your credit score. It is actually more likely that a payday loan will harm your credit, as high fees and an unaffordable interest rate make it much harder to pay back.
With so many options to choose from, picking a payday lender can seem tough. To find one that works for you, firstly check whether the lender follows regulations. Then ask: are they transparent about fees? What are their reviews like? Lastly, assess whether their offerings work for you needs e.g. do they offer a guaranteed turnaround time, or have an online-only option?
Yes. You may be subject to a fee for doing so, but this varies by province.
If you’re denied a payday loan, it’s probably because you already have an active loan with that lender. Try applying through another lender. Or, work on paying off your outstanding debts and building your credit with services such as credit counselling or a debt management program, so you can more easily access other borrowing tools.
Although payday loan approval is typically based on employment pay, as long as you have some form of pay coming in, it doesn’t actually matter where it comes from, or how much it is. All that matters is that you can pay back the cash you borrow once you receive your next pay. This means these loans are available to those receiving pay via benefits, child support and so on.
Below you’ll find a list of reputable companies that offer personal and installment online loans in Canada. Take a look and compare your options, including products offered, interest rates, terms, qualifications and even reviews from other customers. When you’ve found the loan company you like, hit “Apply Now” next to the lender to start the application process.