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Borrowing money is hard for some people. Lenders might not lend to you if you don’t have a steady source of income or a good credit rating. It’s still possible to borrow money even with these issues. However, you’ll typically pay very high interest rates because you’ll need to use a lender that services the high-risk market. The government is aware that vulnerable people can be preyed upon by high-risk lenders. In an effort to protect consumers, new Alberta payday loan regulations have reduced the maximum amount of interest a payday lender can charge.
How Payday Loans Work in Alberta
Payday loans are short-term, high-interest loans available in many parts of Canada. Payday lenders operate online, and many have physical storefronts. To qualify for a payday loan, you need a steady source of income, like a paycheque or government pension, a bank account, and a permanent address. After you complete an application form, the money can be available to you in as little as an hour.
Payday loans in Alberta in 2025 have the following features:
- The maximum amount is $1500.
- You have a minimum of 42 days and a maximum of 62 days to repay it.
- The cost is $14 per $100.
- The maximum APR (annual percentage rate) is 35%.
- Dishonoured repayment fees can’t exceed $20, and are in addition to the $14 per $100.
Payday loans are a costly way to borrow money. High interest rates can cause financial strain, especially for vulnerable borrowers. Understanding this, the federal government capped the criminal interest rate at 35% APR to protect consumers from excessive charges. It’s important to know that charging interest above this limit is illegal in Canada, with some exceptions.
Before January 1, 2025, the criminal APR was approximately 47%. Prior to the payday loan changes in Alberta, the provincial government set the rates for payday loans.
Alberta payday loan regulations
There haven’t been many changes to payday loans in Alberta, but the key update is the interest rate cap. Under the new payday loan rules/laws, Alberta residents will pay a maximum annual percentage rate (APR) of 35%. The APR includes interest, fees, insurance, and closing costs. Before 2025, Alberta payday lenders could charge $15 per $100 borrowed, so this change helps protect consumers from high costs.
Some additional rules that apply to payday loans are:
- The payday lender must be licensed.
- If your payday loan is outstanding, your lender can’t roll it over into another loan.
- You have at least 42 days and two installments to repay the loan.
- Payday lenders can’t make unauthorized withdrawals from your account.
- You have the right to return the money and cancel the agreement within two days.
Why do people use payday loans?
These loans are a convenient way to fill a financial gap. If you’re short of money to pay a bill or cover an emergency, you might be tempted to consider a payday loan. They’ll provide you with up to $1500, and you can sometimes have the money in as little as an hour. Applying is easy, and lenders will approve you even if you have a poor credit rating.
Although payday loans offer convenience, they come with significant risks, such as high interest rates and the potential to fall into a cycle of borrowing. These loans can lead to long-term financial strain, especially if you repeatedly borrow to cover previous debts, making it harder to escape debt in the future.
Why you should avoid payday loans
A payday loan seems like a good idea when you need emergency cash. However, it’s best to avoid these loans for several reasons. The first is that they are expensive. If you borrow $500 and repay it by the due date, you’ll be paying $70 in interest.
Another reason not to use a payday loan is that it can keep you in a cycle of borrowing. Repaying your loan can leave you short of cash the following month, causing you to borrow again.
Failing to repay a payday loan is very expensive due to additional charges. It will also hurt your credit score, as these loans may be reported to the credit bureaus.
Finally, changes to payday loans in Alberta could leave you unable to access them. Lenders can’t charge as much as they did before the Alberta payday loan regulations changed. Some will be unwilling to lend to high-risk borrowers because the money they’re making won’t offset the risk. If you’re a high-risk borrower, they may refuse to grant you a payday loan, leaving you unable to get the funds you need.
How to get out of payday loans
If your financial situation leaves you short of cash, there are some steps you can take to manage your money better. Creating a budget, improving your credit score, setting up an emergency fund, paying off any payday loans you have, and finding another credit solution can help you avoid payday lenders.
- Create a budget: A budget will show you how much money you have coming in and how much you’re spending. Making some adjustments can make a big difference in helping you manage without payday loans.
- Create an emergency fund: If you have room in your budget, consider setting aside money regularly. You’ll be able to use the funds to cover emergencies without having to borrow.
- Pay off payday loans: If you currently have any payday loans, pay them off as soon as you can. The sooner they are off your record, the better.
- Improve your credit score: Check your Equifax and TransUnion credit scores. Take steps to improve it if necessary. A better credit score will help you borrow at better interest rates if you need to.
- Find another credit solution: Credit cards, loans, lines of credit and overdraft protection typically have lower interest rates and better repayment terms than payday loans.
Where to Get Debt Help
Payday loans can quickly add up, leaving you with more debt than you can repay. Our Licensed Insolvency Trustees at Allan Marshall and Associates are debt relief professionals. We offer government-approved, legally binding debt solutions to help you put your unsecured debts behind you, including payday loans. Our team understands the stress that too much debt can cause. We will work with you to help you get out of debt as soon as possible. Book a free appointment online or by calling 1888-371-8900. We look forward to working with you!
