Payday Loans Ontario & Payday Debt Consolidation In Ontario

Payday loans in Ontario can easily lead to overwhelming debt problems with excessive interest rates which is why many look for payday debt consolidation options. In Ontario, three in 10 people who file for bankruptcy or a consumer proposal carry at least one payday loan as part of their total outstanding debt balance. A large number of Canadians, at least 73%, owe more than one payday loan. On average, insolvent payday loan borrowers owe $3,464 on more than three loans, on top of other unsecured debts. In fact, insolvent debtors are using payday advances to keep up with existing debt repayment.

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Yes, payday advances are very convenient, offering a way to access quick cash to tide you over until your next paycheck. However, the reality is that too often the cash flow shortfall is not a temporary situation for most borrowers. You borrow once to help deal with a short-term cash flow problem now when it’s time to repay the loan you find that you are still short for necessities, and so you take out another payday loan to repay the first and yet another one to make bill payments. On and on it goes as you go deeper in the hole until ultimately you get caught up in what is referred to as the ‘payday loan cycle.’

The main problem with dealing with payday services is that they’re incredibly costly. Interest charges alone are significantly higher than credit cards or other types of borrowing. In Ontario, a payday loan can cost up to $15 for every $100 that you borrow. This may not seem like much initially, but if you do the math you can see exactly that you’re paying a staggering 15% interest to borrow money for two-weeks – or an annual interest rate equal to 390%!

Compare that to a credit card, which typically may charge 20% interest annually, and you pay significantly more interest on a payday loan than if you were to borrow the same amount of money on a credit card.

On top of interest charges you also have to factor in other fees normally charged that add up to the total payback, which can include:

  • Initial or one-time setup fees
  • Rollover fees
  • Processing fees
  • Early or late repayment fees
  • Convenience charges
  • Verification fees
  • Broker and collection fees

When it’s combined with fees, the total cost of borrowing will amount to well over what was initially borrowed.


It can be very difficult to get out of using payday loan debt because of the high-interest rates.

If you are trapped in the cycle, or you find yourself constantly relying on payday services or cash advances to make ends meet, you might consider the following debt relief options to take back control of your finances.

Take out a less expensive short term loan to for debt consolidation

If you have just one or two payday debts you might consider getting a short-term loan with a lower interest rate from a bank or private lender, or a line of credit, and then use this loan to consolidate your outstanding payday loans. These small loans can have interest rates as high as almost 60%, which is the maximum allowable annual interest that may be charged in Ontario, but that’s still less expensive than a payday loan. Moreover, instead of a two-week cycle to pay back the money borrowed, a short-term loan allows you to make steady payments in over a few months, and if you make all your payments on time they can even help improve your credit report.

Consolidate with a debt management plan

If you have multiple payday loans, and if you have limited borrowing options because you do not have a good credit score, this could be an option for you. A certified credit counsellor through a credit counselling agency can help you negotiate a repayment plan with your creditors and work out a payment schedule for equal monthly installments to be paid over the course of up to 5 years. However, there are two important things to consider. One, not all payday companies will waive interest costs and you will have to repay 100% of the debt plus fees. Another thing to know is that not all payday lenders will participate in a debt management plan, so you might need to find an alternative debt relief solution.

If your multiple payday loans cannot qualify you for enrolling in a debt management plan, you may need the protection and debt relief available through a Licensed Insolvency Trustee.

Consumer proposal

Payday loans too often cannot be included in a debt management plan because most lenders will not participate, however they can be included and eliminated in a consumer proposal.

If you have a poor credit score and it could be difficult for you to borrow money with a low enough interest rate, plus you have a lot of other high-interest debt, such as credit cards, bank loans and tax debts including all fees and costs, a consumer proposal is almost always the cheaper alternative. In a consumer proposal, your trustee can negotiate for debt reduction which can eliminate interest charges as well as write off certain debts so that you pay significantly less than what you actually owe. Successful negotiations in a consumer proposal can often lead to up to 80% debt reduction! Moreover, you’ll be able to make a fixed monthly amount for a period usually up to 5 years.

Filing bankruptcy

If your income is precarious that keeping up with monthly payments in a consumer proposal can lead to difficulty, you may have to consider declaring bankruptcy to end the payday loan cycle as the last resort.


Taking out a short term loan with your bank or other private lenders is overall less expensive than the total cost of borrowing from a payday or cash advance service company. Most payday lenders will not participate in a voluntary debt management plan. A consumer proposal can consolidate and eliminate multiple payday loans. As a last resort, payday loans can be discharged by filing bankruptcy. In the end, what debt relief solution you choose to get out of the cycle of payday loan debt will largely depend on your unique financial situation. Contact us at Richard Killen & Associates and talk to a local licensed insolvency trustee in your area for a free consultation.

We can review all your options, help you find the best plan that you can afford financially and help you look at alternatives or create a plan to improve your cash flow management so you can stop using cash advance services once and for all.

Payday loans in Ontario can be a vicious cycle that leads many to consider payday consolidation loans, consumer proposals or other alternatives to break the cycle and get much-needed debt relief.

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    Since 1992, Richard Killen & Associates, a Licensed Insolvency Trustee, have helped thousands of people resolve their financial problems. With 25 years experience in this industry, our president, Richard Killen, and the rest of our team understand the difficulties that honest people can sometimes find themselves in. This expertise makes it possible to provide you with a service that effectively deals with the issues.

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