This guide sets out the legal cost cap, turns it into an annual rate, and compares it with the bank options most people already have.

The short answer

In nine provinces, a payday loan can cost up to $14 for every $100 you borrow, all fees included. On a two-week loan that equals a simple annual rate of 365%. A $500 loan costs up to $70 for two weeks, while the same $500 on a line of credit, overdraft or credit card cash advance costs between $6.53 and $9.41 under the FCAC’s cost assumptions.

The gap gets wider every time you renew. If you repay and re-borrow $500 every two weeks for two months, you pay $280 in fees. A line of credit would cost about $11 for the same eight weeks.

What the law caps, and where

Payday loans sit outside the Criminal Code’s normal interest limit. Section 347 makes it a crime to lend at an annual rate above 35%. Section 347.1 exempts a payday loan from that limit only if all of these are true:

• The loan is $1,500 or less.
• The term is 62 days or less.
• The total cost of borrowing does not exceed the limit set by regulation.
• The lender is licensed by a province that the federal government has designated.

The Criminal Interest Rate Regulations set that cost limit at 14% of the amount advanced, which is $14 per $100. They have been in force since January 1, 2025. Before that date, British Columbia allowed $15 per $100.

Source: FCAC, Payday loans (modified October 14, 2025). The FCAC notes the territories have no specific payday loan rules, so the 35% criminal rate is the ceiling there.

What $14 per $100 means as an annual rate

A flat $14 fee feels small next to an interest rate like 23%. They are not measured the same way. A credit card rate is per year. A payday fee is for about two weeks.

To compare them, stretch the payday fee over a year. There are about 26 two-week periods in a year, so $14 per $100 for 14 days equals 14% times 365 divided by 14, or 365% a year. That is a simple rate with no compounding. It is more than 10 times the 35% limit that applies to almost every other consumer loan.

Lenders must show you this cost. Ontario’s consumer protection page says payday lenders have to state the cost of borrowing as an annual percentage rate in their ads and agreements. Look for that line before you sign.

Payday loan vs bank options: the cost of $500

The table below uses the FCAC’s own assumptions for each option, applied to a hypothetical $500 loan. The payday column assumes you repay at the end of each two-week loan and take out a new one, which is allowed once the first loan is paid in full.

Hypothetical example using the FCAC’s assumptions: 23% for a cash advance, 21% for overdraft and 8% for a line of credit, each with one $5 fee and simple daily interest. Your own card, overdraft or credit line may cost more or less.

Two things stand out. First, even for a single two-week loan, the payday option costs about seven times more than the most expensive bank option. Second, the payday cost grows in $70 steps while the others grow by cents a day. Over a full year of renewals, the fees add up to $1,820, more than three and a half times the $500 you needed.

How we checked the numbers

We first reproduced the FCAC’s own example of a $300 loan for 14 days. Using its stated rates and fees, our formula gives $5.92 for a line of credit, $7.42 for overdraft protection, $7.65 for a cash advance and $42 for a payday loan. Those match the FCAC’s figures to the cent. We then ran the $500 cases twice: once with a closed formula and once by adding up interest day by day.

Rules that protect you once you borrow

The details vary by province. Ontario and British Columbia publish clear consumer rules, so here is what they say.

Ontario

• Loan size: no more than 50% of your net income per loan.
• Cancelling: you have two business days to cancel without a penalty or a reason.
• No rollovers: a lender cannot roll one loan into another or give you a new loan before the first is paid in full.
• Extended payment plan: if you take out three loans within 63 days, the lender must offer one. If you are paid weekly, every two weeks or twice a month, it is spread over at least three pay periods, with no instalment above 35% of the loan plus the cost of borrowing. If you are paid monthly, it is spread over at least two pay periods, with no instalment above 50%. You can pay it off early with no penalty.
• Repeat debits: a lender cannot process a post-dated cheque or pre-authorized debit more than once if doing so would trigger overdraft or NSF fees at your bank.

British Columbia

• Loan size: up to $1,500, and no more than 50% of your paycheque.
• Cancelling: two business days, with no extra charge.
• One at a time: a lender cannot give you more than one loan at once or roll a loan over.
• Third loan in two months: you can repay it in three biweekly payments.

If a failed payment does hit your bank account, see our guide to NSF fees and the $10 cap. If a lender keeps pulling money you did not agree to, read how to reverse a pre-authorized debit.

Before you take a payday loan

The FCAC suggests trying these first. In a 2016 FCAC survey of 1,500 payday borrowers, only 35% said they had access to a credit card and 12% had a line of credit.

1. Ask for more time. Call the company you owe and ask for a short delay or a payment plan. It is the first option the FCAC lists.
2. Check what you already have. An unused line of credit, overdraft protection or credit card is almost always cheaper, even a cash advance. Our cash advance cost guide shows the full math.
3. Ask your employer. A pay advance, or cashing in vacation days, costs nothing in interest.
4. Ask your bank about a small loan. The FCAC lists a loan or line of credit from your own financial institution as a less expensive option.
5. If you still borrow, borrow once. Take only what you need, check the APR on the agreement and plan the repayment so you do not need a second loan.

If a payday loan is covering a credit card bill, the cheaper fix may be on the card itself. See what paying only the minimum costs and what happens if you miss a payment.

Frequently asked questions

• Sources, checked October 25, 2026: FCAC: Payday loans (modified 2025-10-14); Criminal Code, section 347 and section 347.1 (current to 2026-09-30); Criminal Interest Rate Regulations, SOR/2024-114 (current to 2026-06-21), section 3; Ontario: Payday loan, your rights (updated 2024-12-31); Consumer Protection BC: Payday loans; FCAC: Payday Loans, Market Trends (2016 survey; modified 2025-09-17).
• Method: Costs use simple daily interest (rate times days divided by 365) plus one $5 fee, as in the FCAC example, and $14 per $100 for each two-week payday loan. We reproduced the FCAC’s $300 example exactly, then checked every $500 figure with a second day-by-day script.

Important: This guide is general information, not financial or legal advice. Payday loan rules are set by each province and can change. Your own credit card, overdraft or line of credit rates may differ from the FCAC assumptions used here. Gizly is not paid by any lender. See our affiliate disclosure.