Payday loans are often marketed as a quick way to cover unexpected expenses between paycheques. While they may seem convenient, they can come with high costs and strict repayment terms. Like any financial product, it’s important to understand how payday loans work, what they’ll cost you, and what protections are in place—especially if you’re considering an online lender.
Payday loans are short-term loans for small amounts of money. These loans are designed to be repaid on your next payday. While they may seem convenient, they come with high fees and short repayment windows that can make them difficult to manage.
In New Brunswick, payday loans let you borrow up to 30 per cent of your net pay, based on your most recent pay stub, with a maximum loan amount of $1,500. The maximum cost is $14 for every $100 borrowed.
All payday lenders operating in New Brunswick must be licensed. This includes online lenders, who are required to follow the same rules as storefront businesses.
Borrowing from an unlicensed lender may leave you without the protections provided under New Brunswick law. Before borrowing, check that the lender is licensed. You can contact the Financial and Consumer Services Commission to confirm a lender’s status or visit FCNB.ca/check-now.
Payday loans are one of the most expensive ways to borrow. In addition to the flat borrowing cost, you may face:
Non-sufficient funds (NSF) fees if you don’t have enough funds in your account to cover the payment
Higher interest rates than traditional loans or lines of credit
Limited repayment flexibility, which can make budgeting harder
Even if you repay early, you’ll still owe the full borrowing cost. That’s why it’s important to understand the total cost before signing.
A payday loan typically has to be paid back on your next payday. But, you have the right to pay the loan back early, or prepay the outstanding balance at any time without additional charges or penalties. You can also make partial prepayments without additional charges or penalties on any scheduled payment date. You will still be required to pay the cost of borrowing (maximum $14 for every $100 you borrow), even if you pay the loan back before the due date. Each payday loan agreement must have statements that explain this.
Lenders Are Not Allowed To:
Take your belongings like your car or house for the payment of a payday loan.
Take or accept the following as security for the payment of a payday loan or the performance of an obligation under a payday loan agreement:
real or personal property (such as your car or house)
an interest in real or personal property
a guarantee
Garnish your wages or ask your employer to take money from your paycheque.
Contact your employer or reach out to you at work.
These rules apply to all payday lenders in New Brunswick, including online lenders. All lenders must be licensed and follow the same laws, no matter how they operate.
If you miss a payment, the loan can become much more expensive. You may face:
Additional fees and interest
Damage to your credit
Difficulty accessing future credit
It’s easy to fall into a cycle of borrowing. If you’re considering a payday loan, make sure you have a clear plan to repay it on time.
Before taking out a payday loan, it’s worth exploring other options that may be more affordable, flexible, and less risky. Payday loans can be expensive and hard to repay, especially if you’re already dealing with financial stress. Here are some alternatives that might work better for your situation:
If you have a small emergency fund—even just a few hundred dollars—it can help cover unexpected costs without borrowing. If you don’t have savings yet, consider starting with a small goal and building from there. Every little bit helps.
While credit cards also come with interest, they often have lower rates than payday loans. If you can pay off the balance quickly, using a credit card may be a more manageable option. Just be sure to check your interest rate and fees associated with cash advances, which can be costly.
Talk to your bank or credit union about overdraft protection. It’s a service that covers shortfalls in your account, often at a lower cost than a payday loan. Some financial institutions offer flexible repayment options or link overdraft protection to a savings account.
These loans usually come with lower interest rates and longer repayment terms than payday loans. You can apply through your bank, credit union, or an online lender (just make sure they’re licensed). A line of credit gives you access to funds when you need them, and you only pay interest on what you use.
Some employers offer pay advances or allow you to work extra hours to increase your income. It’s worth asking if this is an option, especially if you’re facing a one-time expense.
Borrowing from someone you trust can be a short-term solution, but it’s important to be clear about repayment. Set expectations upfront to avoid misunderstandings.
If you’re behind on bills, contact your creditors directly. Many companies are willing to work with you—whether it’s adjusting your payment schedule, waiving late fees, or offering hardship programs.