Payday loans and instalment loans: what to compare

A loan's repayment structure matters more than the speed advertised beside it. A payday loan and a loan repaid in instalments can both be offered online, but they can place very different demands on your next paycheque and later budget.

Start with the contract: the amount received, charges, payment dates and final repayment date. The description fast loan tells you little about those terms.

How the repayment structures differ

The FCAC payday loan guide describes payday borrowing as short-term credit with high fees, with some or all repayment tied to the next paycheque. An instalment loan spreads repayment across scheduled payments. For general background, see the FCAC explanation of personal loans.

More payments can make each withdrawal smaller, but that alone does not establish a lower total cost. Compare the entire schedule, including recurring charges, rather than the first payment.

Keep Quebec's rules separate

The FCAC lists a maximum borrowing cost of $14 per $100 in provinces with the payday-loan regulations it describes. Quebec is not covered by that provincial cap. Do not use it to calculate the cost or legal terms of a Quebec offer.

For Quebec borrowing, consult the consumer protection office's high-cost credit guidance. Check which rules apply to the contract in front of you rather than assuming an advertisement from another province applies locally.

Compare the whole cost

• Use the same amount received for each comparison.
• List interest, required fees and recurring charges.
• Write down every payment and its date.
• Compare total repayment as well as payment size.
• Read the terms for early repayment and a missed payment.

A fee quoted per $100 and an annual percentage rate use different time scales. Ask for a clear written total so you do not mistake a small-looking number for a lower cost. Avoid treating a government illustration as the price a particular lender will charge.

Check what remains after each payment

On each payment date, account for rent, groceries, utilities, transport and other existing commitments. If a large repayment would force you to borrow again for those costs, consider whether another arrangement for the original expense is possible.

With instalments, look beyond the next deposit. Check the later payments too, including periods when work hours or household costs may differ. A manageable first withdrawal does not show that the full schedule fits.

How to read the NovaCash offer

NovaCash publishes a fast online loan of $300 to $2,000 CAD, with weekly, every-two-weeks or monthly payments and early repayment without penalty. The actual offer governs the schedule. Do not assume the full loan is due next payday. Monthly membership fees must be included in the comparison.

The published eligibility conditions also apply. They include employment and direct-deposit requirements; self-employment, social assistance, child tax credits, student loans and retirement savings are excluded. A different lender's policy does not establish NovaCash eligibility.

Consider alternatives before committing

Ask about a bill-payment arrangement and compare any existing credit available to you using its actual costs. If you are already borrowing repeatedly to make payments, the guide to payday borrowing and budget pressure outlines practical next steps and sources of support.