What you need to Know about Payday Loans in Canada

Payday loans are regulated in Canada, but the rules are not identical everywhere. The main differences come down to where you live, because provinces set many of the consumer-protection requirements and the federal Criminal Code framework interacts with those provincial regimes.

This guide covers the key limits, how terms are commonly structured, and the most important checks to make before you sign.

What is a payday loan (in Canada)?

A payday loan is a short-term loan typically structured around a borrower’s pay schedule. Federal consumer guidance describes payday loans as allowing borrowing up to $1,500 with up to 62 days to repay (where they fit within the payday-loan framework).

Payday loans are different from many other credit products because the cost is often expressed as a flat fee per $100 borrowed (when paid on time), rather than interest-only pricing.

The two key cost rules you’ll see in Canada

In provinces with payday-loan regulations: $14 per $100 (maximum cost of borrowing)

Federal consumer guidance lists several provinces with payday-loan regulatory regimes. In those provinces, the maximum cost of borrowing is $14 for each $100 borrowed, and lenders may be able to charge a one-time $20 fee for a dishonoured payment instrument (depending on local rules).

Separately, the federal Criminal Interest Rate Regulations fix the limit on the total cost of borrowing under a payday loan agreement at 14% of the amount advanced (i.e., $14 per $100).

Why the APR can look extremely high on a short-term loan

APR annualizes the cost of borrowing. When a fee is charged over a very short term, the annualized APR can look much higher than the dollar cost over the actual borrowing period.

Example used in federal consumer guidance:

• Borrow $300 for 14 days
• Cost: $14 per $100 → $42
• That is shown as approximately 365% APR when annualized

Which provinces have payday-loan regulations (and why that matters)

According to federal consumer guidance, the provinces with payday-loan regulations (fee/penalty rules) include:

Example used in federal consumer guidance:

• Alberta

• British Columbia

• Manitoba

• New Brunswick

• Newfoundland and Labrador

• Nova Scotia

• Ontario

• Prince Edward Island

• Saskatchewan

Québec and the territories are treated differently under federal guidance.

Provinces vs territories: what’s different?

Federal consumer guidance explicitly notes that each province sets its own rules and that the territories don’t have specific rules for payday loans.

What this means in practice:

• In regulated provinces, payday lenders must follow province-specific requirements (disclosures, licensing, permitted fees, cancellation rights, collection rules).

• In the territories, you should verify what type of short-term credit is being offered and what pricing framework applies, because the standard provincial payday-loan regime structure may not exist.

Cancellation rights and borrower protections can vary by location

Example: Saskatchewan

Saskatchewan’s financial regulator states you may cancel a payday loan before the end of the next business day, and provides specific steps for cancellation (written notice + repayment of the advance).

Example: Ontario

Ontario resources commonly describe a 2-day cooling-off period (two business days) in which a borrower can cancel without paying fees, subject to requirements.

What to confirm before taking any payday loan

1) Confirm the lender is licensed/authorized where you live

Federal consumer guidance recommends ensuring you’re dealing with a licensed payday lender and checking with your provincial/territorial consumer office if needed.

2) Get the full dollar amounts in writing

You should be able to see:

• Amount advanced

• Fees / cost of borrowing

• Payment schedule and due date

3) Understand how repayment is set up

Federal consumer guidance notes payday lenders may ask for pre-authorized debit authorization or a post-dated cheque for the total amount (principal + fees).

4) Know what happens if a payment fails

Federal consumer guidance notes that a failed payment can involve lender fees, possible NSF fees from your bank, and interest on the outstanding amount (depending on the laws in your province).

5) Check your local cancellation window

Cancellation timing and the process can differ (province to province).

Quick regional reference (high level)

Payday Loans in Canada: Final Thoughts

Rules and borrower rights can change, and they vary by jurisdiction - so before you borrow, confirm the total repayment amount, due date, and your cancellation window for your province.

Looking for more information? Visit our site or contact us if you have any questions!