Borrowers could be paying up to 35% interest just to make ends meet
Taking on debt for essentials such as food, rent, or utilities can be a downward spiral, but when the borrowing is at interest rates as high as 35%, the risk is even higher.
A new survey from insolvency firm Harris & Partners highlights the financial challenges faced by millions of Canadian households due to the cost of living, with 71% of respondents admitting having used payday loans for everyday expenses.
Four in ten used the high cost borrowing to cover an emergency expense, suggesting they did not have an emergency savings fund they could tap into, while a quarter used payday loans to pay off other debts.
Perhaps most concerning is that, while 55% were able to pay off their payday loan on time, 23% could not repay and another 22% only paid off part of what they owed. The most cited reason for not paying off the loans is insufficient income (47%) followed by the high interest rates (44%), high debt payments (41%), and unexpected expenses (39%).
“For over 70% of payday loan users, these loans are not a luxury—they’re a means of survival,” says Joshua Harris, CIRP, LIT, and CEO of Harris & Partners. “When Canadians are forced to borrow just to cover essentials like food and rent, it’s a sign of deeper systemic issues. These loans may address short-term needs but often come at a high long-term cost.”
Although Canada’s new criminal interest rate law aims to make borrowing more affordable by capping payday loan fees at $14 per $100 borrowed, many Canadians remain skeptical of its impact.
- 43.8% of borrowers cite high-interest rates as a significant repayment challenge, illustrating the heavy burden these loans impose.
- 22.8% of users who couldn’t repay their loans may now face additional fees, higher overall debt, or further financial distress.
“Lowering the interest rate cap is a step forward, but it doesn’t address the root causes of financial insecurity,” Harris notes. “Until Canadians have better access to affordable credit and financial resources, payday loans will continue to be a lifeline for many—and a burden for most.”
