One of the most important things Ontario consumers should understand before taking out a payday loan is the total cost of borrowing. Because payday loans are short-term products, borrowers may focus primarily on receiving money quickly and overlook how much they will ultimately have to repay.

Ontario has established a maximum cost of borrowing for payday loans. As of January 1, 2025, payday lenders cannot charge more than $14 for every $100 borrowed, including applicable fees and charges directly or indirectly connected with the payday loan agreement.

Consider a simple example. If someone borrows $200, the maximum basic borrowing cost would be $28. If the person borrows $500, the maximum would be $70. A $500 loan could therefore require repayment of $570 under the basic loan terms. These examples illustrate why borrowers should look at the dollar amount they will repay rather than concentrating only on the amount deposited into their bank account.…