Can I get a payday loan on ODSP or Ontario Works?

The short answer is that Ontario’s payday lending rules do not exclude income from social assistance. ODSP and Ontario Works payments arrive on a regular date, into your own account, and a regular payment is income for the purposes of the assessment. Whether any particular application is approved still depends on the same review as everyone else’s — all credit welcome, and approval is based on your income and banking history.

That is the legal answer. It is not the whole answer, and if you are on a fixed benefit the rest of this page matters more than the first paragraph.

Two things to check before you borrow anything

1. A loan can be deducted from your next benefit payment.

This is the part almost nobody knows, and it can cost you far more than the loan does. Under both the ODSP and the Ontario Works rules, a loan is generally treated as income and deducted from your assistance unless it was taken for an approved purpose and your caseworker has approved it. Approved purposes are specific — household items and necessities, disability-related items and services, education and training, a vehicle needed for work, certain health costs.

Borrow $600 for an unapproved purpose and you may find $600 taken off next month’s payment on top of repaying us. The rules are set out in ODSP Directive 5.10 – Loans and Ontario Works Directive 5.9 – Loans. Ask your caseworker before you borrow, not after.

2. The arithmetic on a fixed monthly benefit is brutal.

A payday loan cannot advance more than 50% of your net income for the period, and it cannot come due before your next regular income date. On a monthly benefit that means the loan runs about a month.

Say your monthly payment is $1,300. The most any Ontario lender can advance is $650. At the capped rate of $14 per $100 the cost of borrowing is $91, so $741 comes out of next month’s payment and $559 is left to live on for the month. Over a 30-day term that is an APR of 170.33%.

If $1,300 was not enough this month, $559 will not be enough next month. That is not a moral judgment — it is subtraction, and it is why a payday loan against a fixed benefit so often turns into a second and a third.

Help that is not a loan — check these first

Every one of these is free, and none of them takes money out of next month:

• Your caseworker. Both programs have discretionary and mandatory benefits for specific costs, and Ontario Works can issue emergency assistance for a crisis — food, rent arrears, an eviction. You can apply at ontario.ca/page/apply-emergency-assistance.
• An overdue hydro or gas bill. The Low-income Energy Assistance Program makes emergency grants towards arrears, year round, through local intake agencies. The Ontario Electricity Support Program reduces the bill itself month to month.
• 211 Ontario. Dial 2-1-1, any hour of the day, in 150-plus languages, without giving your name. They know what exists in your neighbourhood — food banks, utility funds, rent banks, furniture programs — and it is their whole job to route you to it.
• The creditor you actually owe. A landlord, a utility or a phone company will often take a payment arrangement. None of them charges $14 per $100.
• A non-profit credit counsellor accredited by Credit Counselling Canada. Free where you cannot pay, and nothing to sell you.

If you do borrow

Know what protections you have, because they apply to you in full:

• The advance cannot exceed half your benefit payment for the period.
• It cannot fall due before your next payment date.
• You can cancel by the end of the second business day, for any reason, and owe only the amount advanced.
• If you are paid monthly and this is your third loan with the same lender inside 63 days, you are entitled to an extended payment plan of at least two instalments, with no fee and no extra interest.
• If a payment fails, the only charges permitted are default interest of 2.5% per month, non-compounding, and $20 for a returned payment. Nothing else.
• Collection calls are restricted to 7:00 am to 9:00 pm, Sundays only between 1:00 pm and 5:00 pm, and not at all on eleven listed holidays.

And talk to us before the due date if it is going to be tight. We would rather rearrange a payment than watch a benefit cheque disappear the day it lands.