How payday loans work in Ontario
A payday loan can bridge a short gap before your next paycheque, but only if you know exactly what it costs and how it's meant to be used. Here's the plain-English version.
What a payday loan is
A payday loan is a small, short-term loan (in Ontario, up to $1,500) that you repay on your next payday, usually within 7 to 31 days. It's designed for a genuine short-term shortfall, not for ongoing expenses.
What it costs
Ontario law caps the cost of a payday loan at $14 for every $100 you borrow. That's the maximum any licensed lender, including Xcash, can charge.
An example: borrow $300 for 14 days and the cost of borrowing is $42, so you repay $342. Because the term is so short, that works out to a high annual percentage rate (about 365%), which is why a payday loan is best used briefly and paid off on time.
Your rights as a borrower
- A two-day cooling-off period. You can cancel a payday loan within two business days at no cost.
- Clear disclosure. Every cost and date must be spelled out before you sign.
- Licensed lenders only. Ontario payday lenders must be licensed. Xcash holds licence #B82-4868768.
Questions about your rights? Contact Consumer Protection Ontario at 1-800-889-9768 or visit ontario.ca/page/payday-loans.
When a payday loan makes sense (and when it doesn't)
It can be the right tool for a one-off, unavoidable expense you can comfortably repay on payday, a car repair you need to get to work, say. It's the wrong tool if you'd be borrowing to cover regular bills, or if you'd need another loan to repay this one. If that's the situation, a longer-term option or debt help is usually the better path.
Feeling stuck in a cycle? If debt keeps rolling over, a payday loan won't fix it. Our guide on consumer proposals explains a government-regulated way to reduce what you owe.
The bottom line
Used briefly and repaid on time, a payday loan is a straightforward way to cover a short gap. Know the cost, know your rights, and never borrow more than you can repay on your next payday.