What are the alternatives to a payday loan?
A payday loan costs $14 per $100. Most of these cost nothing. Ask the creditor for time, ask payroll about an advance, check a credit union, and find out what help already exists.
We are a licensed payday lender, and we would still rather you read this page first. A payday loan is one of the most expensive forms of credit available in Canada. It is the right tool for a narrow job — a gap that genuinely closes on your next payday — and the wrong tool for almost everything else.
Here is what to try before you borrow, roughly in order of how much trouble it saves.
1. Ask the creditor you actually owe for time
This is the most underused option in the country. The landlord, the utility, the phone company, the insurer, the dentist: most of them have a hardship process, most would rather have a payment arrangement than a collection file, and none of them charges $14 per $100.
Ask before the due date, not after. Say what you can pay and when. Get it in writing, even if the writing is an email confirming the call.
2. Ask payroll about an advance
Many employers will advance part of a pay you have already earned, and an increasing number offer earned-wage access through their payroll provider. It usually costs nothing or close to it, and the conversation is more routine than people fear — payroll departments field it constantly.
3. Talk to your bank or a credit union
- Overdraft protection on a chequing account typically costs a small flat fee plus interest — a fraction of a payday loan for the same few days.
- A credit card cash advance charges interest from the day you take it, usually somewhere near 20% a year, plus a flat advance fee. On $500 for two weeks that is well under $15, against $70 for a payday loan.
- Credit unions are worth a specific mention. Many Ontario credit unions offer small personal loans, credit-builder loans, or overdraft to members at ordinary rates, and they will often talk to someone the banks have turned down.
If any of these is available to you, it is cheaper. Not slightly — by a multiple.
4. Find out what help already exists
There is a large amount of assistance in Ontario that people never claim because they do not know it is there.
- 211 Ontario — dial 2-1-1. Answered by a person, 24 hours a day, in more than 150 languages, and you do not have to give your name. They will tell you what exists near you: food banks, rent banks, utility funds, furniture programs, community loan funds.
- An overdue hydro or gas bill — the Low-income Energy Assistance Program gives emergency grants towards arrears, year round, through local intake agencies. The Ontario Electricity Support Program lowers the monthly bill for lower-income households.
- A genuine crisis — Ontario Works can issue emergency assistance for essentials, whether or not you are already on assistance. Apply at ontario.ca/page/apply-emergency-assistance.
- Already on ODSP or Ontario Works? Speak to your caseworker about discretionary and mandatory benefits before borrowing anything, and read Can I get a payday loan on ODSP or Ontario Works? — a loan can be deducted from your next payment if it is not for an approved purpose.
5. Get free advice if this is bigger than one bill
If the shortfall repeats every month, the problem is not this month. A non-profit credit counsellor accredited by Credit Counselling Canada will go through everything you owe, help you build a plan, and negotiate with creditors. Member agencies are not-for-profit, their counsellors are accredited, and services are provided at no cost where you cannot pay.
If the debt is genuinely beyond repayment, a Licensed Insolvency Trustee will explain your options — including ones short of bankruptcy — and the first consultation is normally free.
The one thing not to do
Do not take a payday loan to repay another payday loan. With the same lender it is prohibited in Ontario. With a different lender it is legal, and it is the single move most likely to turn a bad month into a bad year: two repayments, one paycheque, and a third loan looking like the only way out.
And if a payday loan is still the right answer
Sometimes it is. The car that gets you to work has died, the money exists next Friday, and the gap is real and short. In that case, borrow the smallest amount that solves the problem, know the exact total before you sign, and read what it costs with clear eyes. Every figure is on the table before you agree to anything, and you can still walk away, at no cost, until the end of the second business day.