Many people are struggling right now due to high household debt levels and the increased cost of living. If you’re in a situation where it has become difficult to pay your bills, you may think of using a payday loan to cover your cash shortfalls. But before you do, make sure you’re aware of the risks and costs – and that you consider other options.

Payday loans are different from traditional loans because you may only take them out for a short period of time, you may qualify without a credit check, you pay a flat fee instead of interest when you pay on time, and the lender organizes your loan payments around your payday schedule.

Payday loans are very expensive compared to other types of loans offered by banks and credit unions. That is especially true if you don’t pay your loan on time. In that case, you may have to pay a fee if your cheque or pre-authorized debit doesn’t go through, and you usually must pay interest right away. The annual interest rate of using such services can be 400 per cent or even higher. Before taking out a payday loan, be sure that you can pay it back on time. If not, your financial situation may get worse.

Each province sets its own rules about payday loans. The territories don’t have specific rules. Contact your provincial or territorial consumer affairs office to learn more about local payday lending rules. And remember to consider all options before going with a payday loan. Seek advice from reputable sources to explore the different financial options available to you. Qualified professionals may help you find the best solution for your financial needs. These include a financial advisor, an accredited credit counsellor, a licensed insolvency trustee or an insolvency lawyer.

Learn more about payday loans and how to manage your money and debt at canada.ca/money