Home / Payday loan alternatives
Payday loan alternatives in Canada
Payday loans are one of the most expensive ways to borrow. Most of the options below cost less, and some cost nothing at all.
By the Urgent Money team. Reviewed November 5, 2026. Figures are from the Financial Consumer Agency of Canada and the Government of Ontario (see sources).
The short answer
In most provinces a payday loan can cost up to $14 for every $100 borrowed, usually for about two weeks, so $300 costs $42. According to the Financial Consumer Agency of Canada, the same $300 for 14 days costs roughly $6 to $8 on a line of credit, overdraft protection or a credit card cash advance. Before you borrow, ask for more time on the bill, ask your employer for a pay advance, or use credit you already have. If banks won't lend to you, an installment loan spreads the cost over a few months and costs far less per dollar than a payday loan.
Cheaper options, from least to most expensive
- Ask for more time. Call the utility, phone company, landlord or card issuer before the due date and ask for an extension or payment plan. Many will say yes.
- Pay advance. Ask your employer for an advance on your pay, or whether you can cash in unused vacation.
- Family or friends. Put the amount and repayment date in writing so it doesn't strain the relationship.
- Bank or credit union credit. A line of credit or small loan is usually the cheapest way to borrow if you qualify. Some credit unions run small-loan programs.
- Overdraft protection. More than a line of credit, much less than a payday loan, if repaid quickly.
- Credit card cash advance. Interest starts right away and there's usually a fee, but over a short period it's a fraction of a payday loan's cost.
- Installment loan. If your credit has kept you from bank credit, an installment loan lets you repay over months in equal payments that follow your pay schedule. It costs more than the options above, but you don't have to find the whole amount on your next payday.
- Credit counselling. If you'd be borrowing to pay other debts, a non-profit credit counsellor can build a budget with you and may arrange lower payments. Find one through Credit Counselling Canada.
What borrowing $300 for 14 days costs
| Way to borrow | Cost |
|---|---|
| Line of credit | $5.92 |
| Overdraft protection | $7.42 |
| Credit card cash advance | $7.65 |
| Payday loan | $42.00 |
Financial Consumer Agency of Canada comparison. Assumptions: line of credit at 8% a year plus a $5 fee; overdraft at 21% plus a $5 fee; cash advance at 23% plus a $5 fee; payday loan at $14 per $100, about 365% a year.
An installment loan is repaid over months rather than two weeks. Example, for illustration only: a $300 installment loan at 32% APR over 98 days is repaid in 7 payments of about $44.99 every two weeks, for a total of $314.93, so the cost of borrowing is $14.93. Some lenders also charge membership fees, which must be included in the total cost your lender shows you before you sign.
Canada's legal limit on borrowing costs
Since January 1, 2025, the Criminal Code caps most consumer loans at a 35% annual percentage rate (APR), including interest and fees. It replaced the old limit of a 60% effective annual rate.
Payday loans are an exception in the provinces that regulate them: Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island and Saskatchewan. There, the maximum is $14 per $100 borrowed, which is why a two-week payday loan can legally work out to around 365% a year.
Ontario's payday loan rules
Ontario's Payday Loans Act gives you these protections:
- The total cost can't exceed $14 per $100 borrowed.
- You can cancel within two business days, with no penalty and no reason needed.
- No rollovers: a lender can't give you a new payday loan until the first is repaid.
- One loan can't be more than 50% of your net pay.
- After three payday loans within 63 days, the lender must offer an extended payment plan, and you can repay early without penalty.
- Fees for a bounced payment are capped, and a lender can't run a payment twice if it causes you bank fees.
- If you fall behind, a lender can contact you at most three times a week, never on holidays, and never your family, friends or neighbours.
- Payday lenders must be licensed; you can check a lender's licence with the province.
Full details are on the Government of Ontario's payday loan rights page.
How to break a payday loan cycle
- Stop taking new payday loans. Each one adds up to $14 per $100.
- Ask for an extended payment plan. In Ontario, lenders must offer one after three loans in 63 days.
- Replace several loans with one. A consolidation or installment loan with a lower cost and payments over months can end the cycle, as long as you don't take new payday loans alongside it.
- See a non-profit credit counsellor. They can negotiate with creditors for free or at low cost.
When an installment loan makes sense
If you've tried the cheaper options and banks won't lend because of your credit, Urgent Money lets you apply once and get matched with lenders in our network. Most offer $300 to $3,000, repaid over 90 to 120 days at 22% to 32% APR. See installment loans in Ontario for costs and your rights.
Urgent Money is not a lender. Each lender sets its own rate and fees and shows you the full cost before you sign.
Sources
- Financial Consumer Agency of Canada, Payday loans: cost comparison, alternatives, provincial cost limits.
- Government of Ontario, Payday loan: your rights: Ontario borrower protections.
- Criminal Code, section 347: the 35% annual percentage rate limit.
General information, not financial or legal advice.