How do people get stuck?
It usually starts with one loan that’s hard to repay in a single payment. Repaying $570 on a $500 loan leaves you $570 short, so you borrow again. Each round costs another fee. Within a few months, the fees can exceed the original amount you needed, and many people end up with loans from more than one lender at once.
Step 1: Stop the next loan
Don’t borrow from a new lender to repay an old one. List every loan you have: the lender, the balance, the due date and the fee.
Step 2: Ask for an extended payment plan
In Ontario, if you’ve taken three payday loans from the same lender within 63 days, the lender must offer an extended payment plan that spreads repayment over several pay periods. In Alberta, every payday loan must already be repayable in instalments over at least 42 days. Other provinces have their own rules; ask the lender and check your province’s page.
Step 3: Talk to a non-profit credit counsellor
Non-profit credit counselling agencies give free advice. They’ll look at your whole budget and, if it makes sense, set up a debt management plan: you make one monthly payment to the agency, and it pays your creditors, often after negotiating lower interest. Find one through Credit Counselling Canada, or your province’s non-profit agencies listed on our city pages.
Step 4: Consider a consolidation loan
A personal loan from a bank, credit union or reputable lender, repaid over a year or more, can replace several payday loans. Personal loans are capped at 35% APR, so even a high-rate consolidation loan usually costs far less than rolling payday loans. Read the terms carefully and avoid adding new payday loans afterward.
Step 5: If debts are much larger
If payday loans are part of a bigger debt problem, a Licensed Insolvency Trustee can explain a consumer proposal, a legal arrangement to repay part of what you owe over time. Initial consultations are free.
What can’t a lender do while I’m working this out?
Provinces limit collection practices. In Ontario, for example, a payday lender can’t contact you more than three times a week about a missed payment, can’t contact your family, friends or employer about the debt, and can’t use threatening language. If a lender breaks the rules, report it to your provincial regulator.