A payday loan is a short-term loan that you promise to pay back from your next pay cheque. Fees and interest charges make payday loans a very expensive way to borrow money. These loans are offered by privately owned companies that are not regulated by the federal government.
If you get a payday loan, all payday lenders will require you to provide a postdated cheque or to authorize a direct withdrawal from your bank account to pay back the loan, along with all the different fees and interest charges that will be added to the original amount of the loan.
Remember to borrow only an amount that you are 100 percent sure you can repay on the due date of the loan. If you have not paid the loan by the due date, some lenders may cash your cheque or process the direct withdrawal you signed on the day after your loan's due date, and charge you another fee. If it is sent to a collection agency, this will likely be reported to a credit-reporting agency and could have a negative impact on your credit report.
For more information on payday loans, read FCAC’s publication Payday Loans: An Expensive Way to Borrow.