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How to Get off the Payday Loan Cycle

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Table of ContentsFrequency of Payday Loans

The True Cost of A Payday Loan

Payday Loan Regulations

Know Your Rights

Alternatives to Payday Loans

Get Help - Debt Relief Options

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• 7-10% of Canadians rely on payday loans to make ends meet

• 52% are likely to use cheque-cashing or payday loan companies more than once a year

• 12% use these services monthly• 10% do so more than once a month

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Frequency of Payday Loans

Frequent use of payday loans, including payday loan rollovers, is a primary indicator of debt problems.

• In Ontario, payday loan costs are limited by law to $21 for every $100 borrowed.

• If you do not pay your loan on time, extra interest can be charged on top of the above fee.

• Interest rates on unpaid payday loans are often as high as 60% per year.

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The True Cost of a Payday Loan

Payday loans are a very expensive borrowing option.

• The Criminal Code of Canada limits interest to 60% per year.

• Most provinces have created specific regulation to limit payday loans.

• In Ontario, payday lenders are licensed by the Ontario Ministry of Consumer Services. You should never borrow from an unlicensed payday lender.

• Regulations are governed by the Ontario Payday Loans Act.

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Payday Loan Regulations

• Ontario law limits the maximum cost for borrowing at $21 for every $100 borrowed.

• “Rollovers” are prohibited in Ontario. You cannot take out a payday loan with the same lender until your first loan is paid in full.

• You have two days to cancel your payday loan without penalty – considered a cooling off period.

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Know Your Rights

• You must be told, in writing, the amount borrowed, length of the loan, total cost including fees and charges, and the exact due date.

• You must receive the full amount borrowed up front, without deductions.

• You cannot be required to repay an amount of the loan before the due date

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Know Your Rights – Cont’d

• Credit cards are a less expensive borrowing option even at 36% and are more flexible.

• Build an emergency fund so you can reduce your reliance on payday loans.

• Overdraft protection is another cheaper option with rates usually around 21%.

• Try other lending options like a small loan, line of credit or family and friends.

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Alternatives to Payday Loans

Most importantly create and maintain a budget.

If you are trapped in a cycle of payday loan and other debt, consider these debt relief options.

• Payday loans are discharged by filing bankruptcy.

• Payday loan lenders will not participate in a voluntary debt management plan.

• They are however automatically included and eliminated in a consumer proposal.

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Get Help Breaking The Cycle

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