Summary
In most provinces a payday loan can cost up to $14 for every $100 you borrow, usually for about two weeks. On $300, that's $42. The same $300 for 14 days costs about $6 to $8 on a line of credit, overdraft protection or a credit card cash advance, according to the Financial Consumer Agency of Canada. Before borrowing, ask the people you owe for more time or your employer for a pay advance, or use credit you already have. If you can't get credit from your bank, an installment loan spreads the cost over several months and costs far less per dollar than a payday loan. If you're borrowing to pay off other loans, talk to a non-profit credit counsellor first.
What are the alternatives to a payday loan?
Start at the top of this list. The options near the top cost little or nothing; the ones further down cost more but are still cheaper than a payday loan.
- Call the company you owe, whether it's a utility, a phone provider, your landlord or a credit card issuer, and ask for more time or a payment arrangement. Many will agree, especially if you call before the due date. Banks may also offer payment deferrals on mortgages and credit card payment holidays.
- Ask your employer for a pay advance, or whether you can cash in unused vacation days. Some employers offer both.
- Borrow from family or friends, and agree in writing on how much and when you'll pay it back so the loan doesn't strain the relationship.
- A line of credit or a small loan from your bank or credit union is usually the cheapest way to borrow if you qualify. Some credit unions have small-loan programs for members.
- Overdraft protection costs more than a line of credit but much less than a payday loan, as long as you pay it back quickly.
- A cash advance on a credit card starts charging interest right away and usually comes with a fee. Over a short period it still costs a fraction of a payday loan.
- If banks have turned you down because of your credit, an installment loan lets you repay over several months in equal payments that follow your pay schedule. It costs more than the options above, and you won't need to find the whole amount on your next payday.
- If you need to borrow to pay other debts, a non-profit credit counsellor can help you build a budget and may arrange lower payments with your creditors. You can find one through Credit Counselling Canada.
How much does a payday loan cost compared with other options?
The Financial Consumer Agency of Canada compared the cost of borrowing $300 for 14 days:
| Way to borrow $300 for 14 days | Cost |
|---|---|
| Line of credit | $5.92 |
| Overdraft protection | $7.42 |
| Credit card cash advance | $7.65 |
| Payday loan | $42.00 |
FCAC's assumptions: line of credit at 8% a year plus a $5 fee; overdraft at 21% plus a $5 fee; cash advance at 23% plus a $5 fee; payday loan at $14 per $100, which works out to about 365% a year.
An installment loan works differently because it's repaid over months, not two weeks. As an example, a $300 installment loan at 32% APR over 98 days is repaid in 7 payments of about $44.99 every two weeks, for a total of $314.93, so the cost of borrowing is $14.93. Some lenders also charge membership fees, which your lender must include in the total cost it shows you before you sign. Estimate payments for your own amount.
What's the legal limit on borrowing costs in Canada?
Canada's Criminal Code sets a maximum annual percentage rate (APR) of 35% on most consumer loans, including interest and fees. This limit took effect on January 1, 2025, replacing the old limit of a 60% effective annual rate.
Payday loans are an exception in provinces that regulate them: Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island and Saskatchewan. There, the maximum cost is $14 for each $100 you borrow. That's why a two-week payday loan can legally cost around 365% a year while most other loans are capped at 35%.
What are the rules for payday loans in Ontario?
Ontario's Payday Loans Act gives borrowers these protections:
- The total cost can't be more than $14 for every $100 borrowed.
- You have two business days to cancel a payday loan contract, without a penalty or a reason.
- A lender can't give you a new payday loan before the first one is paid off (no rollovers).
- A single loan can't be more than 50% of your net pay.
- If you take out three payday loans within 63 days, the lender must offer you an extended payment plan, and you can pay it off early without a penalty.
- The fee for a bounced payment is capped, and a lender can't run a payment twice if it causes you bank fees.
- If you're behind, a lender can contact you at most three times a week, never on holidays, and never your family, friends or neighbours.
- Payday lenders must be licensed. You can check a lender's licence with the province.
Read the full list on the Government of Ontario's payday loan rights page.
How do I get out of a payday loan cycle?
A payday loan cycle starts when repaying one loan leaves you short before your next paycheque, so you take another. To break it:
- Stop taking new payday loans. Each one adds another $14 per $100.
- Ask your lender for an extended payment plan. In Ontario, lenders must offer one if you've had three loans in 63 days.
- Replace several loans with one. A consolidation or installment loan with a lower cost and payments spread over months can stop the cycle, as long as you don't take new payday loans alongside it.
- See a non-profit credit counsellor, who can negotiate with your creditors for free or at low cost. Find one through Credit Counselling Canada.
When an installment loan is the right fit
If you've tried the cheaper options and banks won't lend to you because of your credit, an installment loan through CashGo lets you apply once and get matched with lenders in our network. Most offer $300 to $3,000, repaid over 90 to 120 days at 22% to 32% APR, with the only check being an online bank verification.
CashGo is not a lender. Each lender sets its own rate and fees and shows you the full cost before you sign.
Sources
- Financial Consumer Agency of Canada, Payday loans (page updated October 14, 2025): cost comparison, alternatives, provincial cost limits.
- Government of Ontario, Payday loan: your rights: Ontario borrower protections.
- Criminal Code, section 347: the 35% annual percentage rate limit.
- Credit Counselling Canada: non-profit credit counsellors.
This guide is general information, not financial or legal advice. Rules differ by province and change over time; check the sources above for your situation.