When receiving government benefits or social assistance, finding a loan can be challenging. Those looking for loans that accept social assistance as an income should consider how future payments of a loan may affect their budget when they have government subsidies as their main source of income. Being on social assistance often means being on a tight budget. When some sort of unexpected expense occurs and you are without a savings, depending on the urgency, you may find yourself in need of fast cash.
If you have a fair credit score you may qualify for an installment loan. This can depend on several things, such as the amount of debt you currently have or whether you have multiple unpaid loans along with other considerations. A fair credit score is around 600 and might go up to 660 or so, depending on the lender, as each has their own estimations of credit ranges and what they might consider bad, fair or good. When your credit score is below 600 it’s often the case that it is considered a bad credit score and the main borrowing options would be payday loans. In many cases a personal loan requires employment and not usually an option when looking for loans that accept social assistance. A personal loan tends to have lower interest rates and higher eligibility requirements.
Choosing an Installment Loan
When looking for loans that accept social assistance an installment loan is often your best choice if you qualify. To be eligible you usually require a credit score greater than 600 and do not carry much debt. Also, you should not have multiple unpaid loans. Your obligations like other debt including loan payments is one way that lenders look at an applicant when determining their level of risk. In doing so, lenders are really looking at how likely an applicant might be able to repay a loan if they were to be approved.
Choosing a Payday Loan
While payday loans are a high interest alternative and another option for borrowing, this type of loan can cause additional problems. In most cases, repayment is expected by the next payday in full. That would be the amount borrowed plus interest and any fees involved. In Canada, depending on the province, these fees are often around $20 per $100 borrowed for payday loans.
Regulations in Canada for Payday Loans
If you took a $500 payday loan in Ontario, Alberta, British Columbia, New Brunswick or PEI, where the cost per $100 borrowed is $15, the amount due would be $575.
Since most payday loans are due by your next payday, you would need to repay $575 within 14 days of borrowing, which is an annual percentage rates (APR) of 391%.
The following charge provides details about loan terms, maximum amounts you can borrow, and maximum amount a lender can charge per $100 by province.
| Province | Cost per $100 (Max.) | Maximum Loan Amount | Maximum Loan Term |
| Ontario | $15 | $1,500 (up to 50% of net income) | 62 days |
| British Columbia | $15 | $1,500 (up to 50% of paycheque) | 62 days |
| Alberta | $15 | $1,500 | 42 – 62 days |
| Saskatchewan | $17 | $1,500 (up to 50% of net income) | 62 days |
| Manitoba | $17 | $1,500 (up to 30% of net income) | 62 days |
| Newfoundland and Labrador | $14 | $1,500 (up to 50% of net income) | 62 days |
| New Brunswick | $15 | $1,500 (up to 30% of net pay) | 62 days |
| Nova Scotia | $17 | $1,500 | 62 days |
| Prince Edward Island | $15 | $1,500 | 62 days |
Note that the above chart also mentions the maximum amount based on net pay or income that is permitted to borrow.
This is because in some provinces the law will limit the amount of your income that you can borrow against.
If you borrowed 100% of your paycheque for a payday loan, on your next payday you would need to pay the principal (amount borrowed) along with the interest on top, and leave you with nothing for rent, food and other expenses. It is important to be cautious about the type of loan offer that you might accept, from guaranteed approval to loans with no refusal. Lenders making such claims are not always trustworthy and require scrutiny. Checking that a lender is licensed and possibly belongs to an association like the CLA in Canada can help with identifying ones that might be more reputable options when looking to borrow.
In the province of Quebec the payday loan regulations are slightly different to other provinces.
If you live in Ontario and your average paycheque were $2,000 you could be eligible to get up to 50% of that, or $1,000.
You would not automatically be approved for 50% of net income, and factors like other debt can determine the amount you can borrow.