How to get out of payday loan debt

Person hands pen to someone who is dealing with payday loan debt

Are you thinking about getting a payday loan? You're not alone. With the rising cost of living, many Canadians are finding themselves in a financial pinch or realizing their paycheque won't stretch as far as they need. To quickly make ends meet, many turn to payday loans, but be cautious, as payday loans can seriously impact your finances. 

How do payday loans work?

Granted by short-term lenders, payday loans can offer quick relief when you experience a financial setback. With most payday loan lenders, you can receive up to $1,500 to cover urgent expenses under the guarantee that you'll pay back the loan using your next paycheque or within 62 days. But beware, payday loans come with extremely high interest rates and fees, making them one of the most expensive options for borrowing money.

How much does it cost to get a payday loan? 

The costs will depend on your lender's terms and the province where you take out the loan. However, in fees, you can expect to pay anywhere from $14 to $17 and up per $100 you borrow. Payday loan interest costs vary but are approximately 500-600% more than other forms of lending, such as a line of credit, a cash advance on a credit card, and overdraft protection on a chequing account.  

For example, below, find the fees associated with borrowing $300 for 14 days using a payday loan compared to borrowing the same amount using other loan and credit options. 

  • Line of credit – $5.92
  • Overdraft protection on a bank account – $7.42
  • A cash advance on a credit card – $7.65
  • Payday loan – $51.00

With high interest rates and various fees, getting out of payday loan debt can become challenging if you can't pay your loan back on time. In addition, if you default on your loan, you will have to pay default fees, and your credit score can be negatively affected.

What happens when I use one payday loan to pay off another payday loan?

You can take out one payday loan to pay off another, but it may put you in danger of taking your payday loan debt to unmanageable levels. With additional fees for obtaining a secondary payday loan, combined with penalties for being unable to repay your first one, using one payday loan to pay off another may cause you greater financial difficulties—generally referred to as the “payday loan cycle.”

What are payday loan lending rules in Canada?

Each province and territory has their own rules and restrictions around payday lending. For more information on payday loans and lending rules where you live, visit the Financial Consumer Agency of Canada.

How can I get out of payday loan debt?

If you can't pay back your payday loans or get stuck in the "payday loan cycle," relief options are available. Payday loans are considered unsecured debt and are included in a consumer proposal or bankruptcy filing. With a consumer proposal, you may be able to reduce your debt by up to 80% while keeping your assets. Learn more about how consumer proposals and bankruptcies work in Canada.


If you've taken out more payday loans than you can manage and want to get out of debt, meet with a Grant Thornton debt professional for a free, no-obligation chat to learn more about your options.

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