Payday loans are a very expensive way to borrow money. Even if you’re struggling financially, think twice—and crunch the numbers—before getting this type of loan.
Depending on the rules in your province, payday lenders can charge fees of $15 to $25 per $100 that you borrow.
As an example, let’s say you borrow $300 for home repairs. The payday lender charges you $51 in fees or $17 for every $100 borrowed. Your loan balance is therefore $351, which amounts to an interest rate of 442 per cent.
There can be serious consequences if you don’t repay your loan by the due date. These may include the following:
- The payday lender may charge you a fee if there isn’t enough money in your account.
- Your financial institution may also charge you a fee if there isn’t enough money in your account.
- The total amount that you owe, including the fees, continues to increase.
There are better options out there
Payday loans should be your last resort to borrow money. Consider cheaper ways of borrowing money, such as:
- Cashing in vacation days or asking for a pay advance from your employer.
- Getting a line of credit, a cash advance on a credit card or a personal loan from your financial institution.
- Getting a loan from family or friends.
Before getting a payday loan and to avoid getting stuck in a debt trap, consider other, less expensive ways to borrow money.
Find more information at canada.ca/money.