Have you ever found yourself in a sticky financial situation where you need some quick cash, but didn’t know the best way to get it? Payday loans in Ontario are probably the easiest and quickest way to get some fast cash. However, while they can provide temporary relief, it’s important to understand how they work and the rules that protect borrowers. In this blog, we’re going to walk you through a few of the basics of payday loans.
Payday Loan Basics in Ontario
Let’s start with the basics. What exactly are payday loans in Ontario? They are a type of short-term loan designed to help people cover unexpected expenses or emergencies. In Ontario, these loans are often used when money is tight, and payday is still a week or two away. They’re quick and easy to access, which is why many people turn to them when they need cash fast.
How Payday Loans in Ontario Work
Here’s how they work: Borrowers apply for a loan and agree to pay it back, usually within two weeks or by their next payday. The amount borrowed is up to a maximum of $1,500 in Ontario. Some people use these loans for urgent bills, car repairs, or other unexpected costs, like high grocery bills for example.
But why would anyone go for a payday loan, instead of just going to a bank for a “regular” loan? Because, unlike traditional loans, they don’t require a lengthy application or a high credit score, making them way easier to qualify for.
Another reason these loans are popular when someone wants to borrow money is their convenience. Many lenders like iCash operate entirely online, making it simple to apply and get approved. And if you are approved, the funds will be sent to your bank account by e-Transfer in about 2 minutes. So you’re getting both the quickness and convenience factor here.
Ontario Payday Loan Licensing Requirements
In Ontario, all payday lenders must follow strict rules and operate fairly to protect Canadians. One of the most important rules is that lenders need a special license to offer loans. But why should you care about licensing? Because it helps you avoid scams and untrustworthy lenders. Licensed lenders are closely monitored by the government, so they can’t charge illegal fees or use unfair practices.
To get a license, lenders need to meet very specific requirements set by the provincial government. These rules include following laws about interest rates, fees, and even how loans are advertised. Any licensed payday lender must clearly show the total cost of borrowing before a person even completes the application process.
Before taking out a loan, always check if the lender is licensed. You can do this by visiting Ontario’s Consumer Protection website or asking the lender directly. With iCash, as soon as you start creating your account, and far before you get to the loan agreement part, our license will be displayed.
Maximum Borrowing Limits and Fees
In Ontario, payday loans (which is often called an online loan) have strict rules about how much you can borrow and how much it can cost you. These rules are in place to protect people from taking on more debt than they can handle.
The maximum amount you can borrow with a payday loan in Ontario is $1,500. However, lenders also consider your income before approving the loan. They’re not allowed to loan you more than 50% of your net income for the loan term. This helps ensure you don’t borrow more than you can realistically pay back.
When it comes to the interest rate & fees, Ontario has capped the cost of borrowing to keep it fair. Online payday lenders can charge a maximum of $14 for every $100 borrowed. For example, if you borrow $300, you’ll owe $342 when it’s time to repay. If a lender tries to charge more than what’s allowed, they’re breaking the law.
Repayment Terms and Extensions
Ontario also has clear rules about how these loans should be repaid and the cost of borrowing. The repayment period for a payday loan in Ontario is usually short—often tied to your next pay cheque. However, lenders are required to give you at least two weeks to repay the loan, even if your payday comes sooner. This is done to make sure you have enough time to manage the repayment.
Rollover loans (where borrowers take out a new payday loan to pay off an old one) are strictly banned in Ontario. This is because it can trap people in a cycle of debt, with fees and interest piling up, which is a messy spot to be in. So, if any payday loan company is willing to offer you more than one payday loan at a time, consider it a massive red flag.
If you can’t repay on time, some extensions may be granted. For example, lenders may offer an extended payment plan, but they cannot charge additional fees or interest during the extension. They can, however, charge NSF (non sufficient funds) fees if you agree upon a specific repayment date, but don’t repay when that time comes.
Borrower Rights and Protections
In Ontario, you should know about certain borrower rights and protections. Let’s take a look at some of these. If you change your mind after taking out a payday loan, you have the right to cancel it within two business days without paying any fees. This is called the “cooling-off period,” and it allows you to rethink your decision.
Payday lenders in Ontario also have rules to follow when it comes to collecting payments. They cannot harass you with excessive calls or use aggressive tactics to recover their money. For example, contacting your employer about the loan is strictly prohibited (unless by some chance you’ve agreed to it in writing). You have the right to file a complaint if lenders break these rules.
Lenders need to make sure you know everything about your loan, before you even finish applying for it. This includes the total cost of borrowing, repayment deadlines, and any other important details.
How Payday Loan Regulations Have Changed Over Time
Regulations in Ontario have changed a lot over the years since the "payday loans act 2008" was introduced. The biggest changes came in 2018 when Ontario reduced the maximum fee for borrowing. Previously, lenders could charge $18 for every $100 borrowed, but this was lowered to $15, and eventually $14 in 2025. The goal here was to make these types of loans less expensive for borrowers.
How to Verify a Legitimate Payday Lender in Ontario
The good news is that if you want to verify if a lender in Ontario is legitimate, there are several ways to easily do so. The first step you’re going to want to take is to find those licenses we mentioned earlier. If they’re a legitimate payday lender, they’ll make sure their licenses are easy to find. With iCash, as soon as you create your account (and far before you apply), you’ll see our license displayed clearly.
If for some reason you can’t find a payday lender’s license on their website, you can also check by visiting the Ontario Consumer Protection website before you sign any payday loan agreement.
Here at iCash, we’re proud of the fact that over one million Canadians trust us when they need financial assistance. We follow and respect all rules and regulations diligently when it comes to online loans. If you ever find yourself in a financial bind, let iCash help you!
