Category: Loans

For many Canadians, student loans are their first major debt. Understanding how repayment works — and what help is available — can make the transition from school to work much less stressful.

Federal and Provincial Loans

Most government student loans in Canada are a combination of a Canada Student Loan (federal) and, in many provinces, a provincial student loan. Some provinces combine both into a single integrated loan with one payment, while others are managed separately. Check your account to see what you have.

When Repayment Starts

After you finish or leave full-time studies, there is typically a six-month non-repayment period before your first payment is due. Use this time to log in to your student loan account, confirm your contact details, and review your repayment schedule.

Interest on Student Loans

The federal government eliminated interest on the federal portion of Canada Student Loans as of April 1, 2023. Provincial loans may still charge interest depending on where you live, so check the terms of your provincial portion. Even without interest, missing payments can still damage your credit.

Choosing Your Repayment Plan

Your repayment schedule is based on your loan balance and the repayment period. You may be able to adjust your payment amount or term. Paying more than the minimum shortens your repayment and, where interest applies, reduces the total cost.

If You Can’t Afford Your Payments

The Repayment Assistance Plan (RAP) can lower your monthly payment based on your family income and size — in some cases to $0 — for a set period. You must apply and reapply periodically. If you are struggling, apply before you fall behind rather than after.

Other options may include revising your repayment terms or, in limited circumstances, help for borrowers with permanent disabilities. Contact the National Student Loans Service Centre or your provincial student aid office to discuss your situation.

Why You Shouldn’t Ignore Student Loans

• Missed payments can be reported to credit bureaus and lower your score.
• Defaulted loans may be sent to collections.
• The government can withhold tax refunds or benefits to recover unpaid amounts.

Smart Repayment Tips

1. Set up automatic payments so you never miss a due date.
2. Prioritize higher-interest debt first, such as credit cards, while keeping student loan payments current.
3. Make extra payments on any portion that still charges interest.
4. Keep your contact information updated so you don’t miss important notices.
5. Claim eligible interest paid on government student loans on your tax return, where applicable.

The Bottom Line

Student loan repayment is manageable when you know your terms and act early. Use the grace period to plan, set up automatic payments, and apply for repayment assistance if your income is low — before problems start.

Program rules change from time to time. Confirm current details with the National Student Loans Service Centre or your provincial student aid office. This article is for general information only and is not financial advice.

If you signed a car loan when your credit was weaker or rates were higher, you may be paying more than you need to. Refinancing — replacing your current car loan with a new one — can lower your interest rate, reduce your monthly payment, or both. Here is how to decide whether it is worth it.

What Does Refinancing a Car Loan Mean?

When you refinance, a new lender pays off your existing car loan and gives you a new loan with different terms. You then make payments to the new lender. The vehicle usually remains the security for the loan.

When Refinancing Makes Sense

• Your credit score has improved since you bought the car, especially after 12 or more months of on-time payments.
• Your current rate is high, for example from dealership subprime financing.
• Market interest rates have dropped since you signed.
• You need a lower payment to make your budget work.
• You want to remove a co-signer by qualifying on your own.

When Refinancing May Not Be Worth It

• Your loan is nearly paid off — most of the interest has already been paid.
• Your current loan has a large prepayment penalty.
• You owe more than the car is worth (negative equity), which makes approval harder.
• The new loan only lowers your payment by stretching the term, increasing the total interest you pay.

Step-by-Step: How to Refinance

1. Review your current loan. Find your balance, interest rate, remaining term and any penalty for paying it off early.
2. Check your credit report and score so you know where you stand.
3. Estimate your car’s value using recent listings for similar vehicles.
4. Compare offers from banks, credit unions and online lenders. Look at the APR and total cost, not just the monthly payment.
5. Gather documents: ID, proof of income, vehicle registration and current loan details.
6. Apply and review the new agreement carefully before signing.
7. Confirm the old loan is paid off and keep making payments until it is.

Example

Suppose you owe $18,000 with four years left at 14%. Refinancing to 8% over the same four years could cut your monthly payment by around $50 and save roughly $2,500 in interest over the life of the loan — assuming no large fees.

Watch Out For

• Extending the term too much. A longer loan lowers the payment but can cost more overall.
• Add-on products such as extended warranties or insurance rolled into the new loan.
• Fees for lien registration or administration.
• Multiple hard credit checks — try to compare offers within a short period.

The Bottom Line

Refinancing can be a smart move if your credit has improved or your current rate is high. Run the numbers on the total cost, avoid stretching the term unnecessarily, and make sure the savings outweigh any fees.

Example figures are rounded estimates. This article is for general information only and is not financial advice.

If you have ever looked at a loan statement and wondered why your balance is going down so slowly, the answer is amortization. Understanding how it works can help you choose better loan terms and save money by paying off debt sooner.

What Is Amortization?

Amortization is the process of paying off a loan through regular payments over time. Each payment is split into two parts:

• Interest — the cost of borrowing, calculated on the remaining balance
• Principal — the part that actually reduces what you owe

Your payment amount usually stays the same, but the mix changes over time. Early on, more of each payment goes to interest. Later, more goes to principal.

Why Early Payments Are Mostly Interest

Interest is calculated on your outstanding balance. At the start of the loan, the balance is at its highest, so the interest portion is also at its highest. As you pay down the principal, the interest charged each period shrinks, leaving more of your fixed payment to reduce the balance.

A Simple Example

Imagine a $10,000 loan at 8% annual interest, repaid monthly over three years. The monthly payment works out to roughly $313.

• Month 1: interest is about $67 (8% ÷ 12 × $10,000), so about $246 goes to principal.
• Month 18: the balance is lower, so interest is roughly $37 and about $276 goes to principal.
• Month 36: almost the entire payment goes to principal.

Over the full term, you would pay roughly $1,280 in total interest.

How the Term Changes the Total Cost

A longer amortization lowers your monthly payment but increases the total interest you pay. Using the same $10,000 at 8%:

Term	Approx. monthly payment	Approx. total interest
2 years	$452	$850
3 years	$313	$1,280
5 years	$203	$2,170

The five-year loan feels easier each month, but costs more than double the interest of the two-year loan.

Amortization on Mortgages

Mortgages work the same way, just over a much longer period — often 25 years in Canada. That is why, in the first years of a mortgage, a large share of each payment goes to interest. Even small extra payments early on can cut years off a mortgage.

How to Use Amortization to Your Advantage

1. Choose the shortest term you can comfortably afford.
2. Make extra payments toward principal when your loan allows it without penalty.
3. Switch to accelerated bi-weekly payments if available — this results in the equivalent of one extra monthly payment per year.
4. Round up your payment — paying $350 instead of $313 shortens the loan noticeably.
5. Ask for an amortization schedule from your lender so you can see exactly where your money goes.

The Bottom Line

Amortization explains why debt feels slow to shrink at first. Once you understand it, you can choose shorter terms, make extra principal payments, and save a meaningful amount in interest.

Figures above are rounded estimates for illustration only. This article is for general information and is not financial advice.

A family member or friend asks you to co-sign their car loan or apartment lease. You want to help — but co-signing is a serious legal commitment. Before you sign, it is important to understand what you are agreeing to.

What Does It Mean to Co-Sign?

When you co-sign, you promise the lender that you will repay the debt if the main borrower does not. Lenders ask for a co-signer when the borrower has limited credit history, a low credit score, or not enough income to qualify on their own.

In practical terms, the lender sees you as equally responsible for the full debt.

The Risks of Co-Signing

1. You may have to pay the entire debt

If the borrower misses payments, the lender can come to you for the full amount owed, plus any fees and interest. In many cases, the lender does not have to try collecting from the borrower first.

2. Your credit score can be affected

The loan typically appears on your credit report. Late or missed payments by the borrower can lower your score, even if you did not know they were behind.

3. It can limit your own borrowing

Lenders count the co-signed debt when assessing your applications. That can make it harder to get approved for your own mortgage, car loan or credit card.

4. It can strain relationships

Money problems between family and friends can create lasting tension. If things go wrong, you may face both a financial loss and a damaged relationship.

5. It is hard to get out of

Once you sign, you usually cannot remove yourself from the loan unless the borrower refinances in their own name or the debt is paid off.

Questions to Ask Before Co-Signing

• Could I afford to make every payment myself if needed?
• Why doesn’t the borrower qualify alone, and is that likely to change?
• How will I know if a payment is missed?
• What happens to the asset (such as a car) if I end up paying?
• Is there another way I can help without signing?

How to Protect Yourself If You Do Co-Sign

1. Read the full agreement and keep a copy.
2. Ask the lender for online access or statements so you can monitor payments.
3. Agree on a plan in writing with the borrower, including what happens if they cannot pay.
4. Check your credit report regularly for missed payments.
5. Plan for a release: encourage the borrower to refinance into their own name once their credit improves.

Alternatives to Co-Signing

• Help the person build credit with a secured credit card.
• Give a smaller gift toward a down payment instead of guaranteeing the whole debt.
• Suggest a less expensive option, such as a cheaper used car.
• Recommend a non-profit credit counsellor to help them improve their finances first.

The Bottom Line

Co-signing is not just a favour — it is taking on debt. Only co-sign if you trust the borrower, understand the agreement, and could comfortably repay the full amount yourself.

This article is for general information only and is not financial or legal advice.

When you need to borrow money, two of the most common options at Canadian banks and credit unions are a personal line of credit and a personal loan. Both can be useful, but they are built for different situations. Choosing the wrong one can cost you more in interest or make it harder to stay on track.

How a Personal Loan Works

A personal loan gives you a fixed amount of money upfront. You repay it in equal instalments over a set term, often one to five years. The interest rate is usually fixed, so your payment stays the same until the loan is paid off.

Best for: one-time expenses with a known cost, such as a car repair, a home project with a fixed quote, or consolidating several debts into one payment.

How a Line of Credit Works

A line of credit gives you access to money up to a set limit. You borrow only what you need, when you need it, and pay interest only on the amount you use. As you repay, the available credit becomes available again — similar to a credit card, but usually at a lower interest rate.

Most lines of credit have a variable interest rate tied to the lender’s prime rate, so your interest cost can rise or fall over time. Minimum payments are often low, sometimes interest-only.

Best for: ongoing or unpredictable expenses, such as a renovation paid in stages, irregular income, or a backup source of emergency funds.

Side-by-Side Comparison

Feature	Personal Loan	Line of Credit
How you receive money	Lump sum upfront	Borrow as needed up to a limit
Interest rate	Usually fixed	Usually variable
Payments	Fixed instalments	Flexible; minimum may be interest only
End date	Yes — paid off by end of term	Often open-ended
Re-borrowing	No — need a new loan	Yes, as you repay

The Hidden Risk of a Line of Credit

Flexibility is the biggest strength of a line of credit — and its biggest risk. Because minimum payments can be very low and there is no fixed end date, it is easy to carry a balance for years. If you use a line of credit, set your own repayment plan with a target payoff date, and treat it like a loan rather than extra spending money.

The Hidden Risk of a Personal Loan

With a personal loan, you pay interest on the entire amount from day one, even if you do not need all the money right away. Borrowing more than you need means paying interest on money that sits in your account. Some loans also charge a penalty for paying off early, so check the terms.

Secured Lines of Credit

Homeowners may qualify for a home equity line of credit (HELOC), which is secured by the home. HELOCs usually offer lower rates, but you are putting your home on the line. Only borrow against your home for purposes that genuinely add value, and have a clear plan to repay.

How to Decide

• Choose a personal loan if you know exactly how much you need and want a firm payoff date.
• Choose a line of credit if your costs are spread out or uncertain and you are disciplined about repaying.
• Compare the interest rate, fees and total cost of each option from more than one lender.

The Bottom Line

Neither option is always better. A personal loan offers structure and predictability; a line of credit offers flexibility. Match the product to how you will actually use the money, and always have a plan to pay it back.

This article is for general information only and is not financial advice.

If you are juggling several credit cards and loans, each with its own due date and interest rate, debt consolidation can sound like a relief. Combining everything into one loan with one payment is simpler — but does it actually save money? The answer depends on the rate you get, the term you choose, and your habits after consolidating.

What Is a Debt Consolidation Loan?

A debt consolidation loan is a new loan used to pay off several existing debts. Instead of making multiple payments, you make one fixed payment to a single lender over a set term. Options in Canada include unsecured personal loans, secured loans, lines of credit, and — for homeowners — home equity products.

When Consolidation Saves Money

Consolidation saves money when the new loan has a lower interest rate than the average rate on your current debts, and the term is not so long that extra time cancels out the savings.

Example: Suppose you owe $10,000 across credit cards charging around 20%. If you consolidate into a three-year loan at 10%, you could save well over a thousand dollars in interest and have a clear payoff date.

When It Does Not Save Money

• The new rate is similar to or higher than your current rates.
• You stretch the repayment over a much longer term.
• There are large fees for setting up the loan.
• You run the credit cards back up after paying them off.

That last point is the biggest risk. Consolidation only works if the spending that created the debt changes too.

Benefits Beyond Interest Savings

• One payment is easier to manage and harder to miss.
• A fixed end date gives you a clear goal.
• Credit score improvement is possible over time as card balances drop and payments are made on time.

How to Qualify

Lenders look at your credit score, income, and debt-to-income ratio. If your credit is damaged, you may only qualify for high rates, which can make consolidation pointless. In that case, other options may be better.

Alternatives to a Consolidation Loan

• Balance transfer credit card: a low promotional rate for a limited time, usually with a transfer fee.
• Debt management plan: arranged through a non-profit credit counselling agency, which works with creditors to combine your payments.
• Consumer proposal: a legal process through a Licensed Insolvency Trustee to repay a portion of unsecured debt — this has a significant impact on your credit, so get professional advice first.
• Debt snowball or avalanche: paying debts one by one, either smallest balance first or highest interest first.

Questions to Ask Before You Sign

1. What is the APR, and what is the total cost of borrowing?
2. Are there setup fees or prepayment penalties?
3. Is the monthly payment comfortably within my budget?
4. Will I close or freeze the paid-off credit cards to avoid new debt?

The Bottom Line

A debt consolidation loan is a tool, not a cure. It works well when it lowers your rate and you commit to not taking on new debt. Run the numbers, compare the total cost, and consider talking to a non-profit credit counsellor if you are unsure which option fits you best.

This article is for general information only and is not financial advice.

Needing a vehicle while dealing with a low credit score is a common situation in Canada. The good news is that bad credit does not automatically disqualify you from a car loan. The challenge is finding financing that is affordable rather than one that costs far more than it should. This guide walks you through the process.

What Counts as “Bad Credit”?

Canadian credit scores range from 300 to 900. Lenders differ, but scores below roughly 600 are often considered poor, and many mainstream banks prefer borrowers in the high 600s or above. A low score can come from missed payments, high credit card balances, collections, a consumer proposal, bankruptcy, or simply having very little credit history.

Where to Find Bad-Credit Car Loans

• Dealership financing: many dealers work with a network of lenders, including subprime lenders who specialize in lower credit scores.
• Credit unions: they may consider your full situation, not just your score.
• Online auto lenders and brokers: they can match you with several lenders from one application.
• Banks: possible if your credit problems are minor or in the past.

What to Expect on Rates and Terms

Borrowers with poor credit typically pay higher interest rates. Lenders may also ask for a larger down payment, a shorter term, or a co-signer. Be cautious of very long terms (seven or eight years): they lower the monthly payment but increase the total interest and can leave you owing more than the car is worth.

Steps to Improve Your Chances

1. Check your credit report from Equifax and TransUnion and dispute any errors.
2. Set a realistic budget. Include insurance, fuel, maintenance and registration — not just the loan payment.
3. Save a down payment. Even 10% reduces the amount you borrow and shows lenders commitment.
4. Gather documents: recent pay stubs, proof of address, bank statements and ID.
5. Consider a co-signer with good credit, understanding they become legally responsible if you miss payments.
6. Get pre-approved so you know your budget before you visit a dealership.

Choose the Right Vehicle

A reliable, modestly priced used vehicle is usually the smartest choice when rebuilding credit. A lower purchase price means a smaller loan, lower insurance costs, and less risk of negative equity.

Red Flags to Watch For

• Pressure to sign the same day or before you have read the contract
• Add-ons such as extended warranties or insurance bundled in without clear explanation
• A lender who will not tell you the APR or total cost of borrowing
• Requests for an upfront fee before approval — a common scam sign

Use the Loan to Rebuild Your Credit

A car loan paid on time every month adds positive history to your credit report. After 12 to 24 months of consistent payments, your score may improve enough to refinance at a lower rate.

The Bottom Line

Getting a car loan with bad credit is possible with preparation. Know your credit, set a full budget, compare multiple lenders, and read every document carefully. The right loan gets you on the road and helps rebuild your credit at the same time.

This article is for general information only and is not financial advice.

A personal loan is one of the most flexible borrowing tools available to Canadians. Whether you want to consolidate debt, cover a major car repair, or pay for a home improvement project, a personal loan lets you borrow a fixed amount and repay it over a set period. This guide explains how personal loans work, what lenders look for, and how to choose a loan that fits your budget.

What Is a Personal Loan?

A personal loan is a lump sum of money you borrow from a bank, credit union, or online lender. You repay it in regular instalments — usually weekly, bi-weekly, or monthly — over a fixed term, often between one and five years. Each payment covers part of the principal (the amount you borrowed) and part of the interest.

Most personal loans are instalment loans, which means the payment amount and end date are known from the start. That predictability is the main difference between a personal loan and a revolving product like a credit card or line of credit, where the balance and payment can change month to month.

Common Reasons Canadians Take Personal Loans

• Debt consolidation: combining several high-interest balances into one payment.
• Home repairs or renovations: a new roof, furnace, or windows.
• Vehicle expenses: repairs or buying a used car privately.
• Medical or dental costs not covered by insurance.
• Moving or major life events such as relocating for a job.

Secured vs. Unsecured Personal Loans

An unsecured loan is approved based on your credit history and income alone. A secured loan requires collateral — such as a vehicle or savings — that the lender can claim if you stop paying. Secured loans are often easier to qualify for and may carry lower rates, but you put the asset at risk.

What Lenders Look At

1. Credit score and history: Canadian scores range from 300 to 900. A higher score generally means better rates.
2. Income and employment: lenders want proof that you can afford the payments, such as pay stubs or bank statements.
3. Debt-to-income ratio: how much of your monthly income already goes to debt payments.
4. Existing relationship: banks and credit unions sometimes offer better terms to existing customers.

Understanding Interest Rates and APR

The interest rate is the cost of borrowing the money. The annual percentage rate (APR) includes the interest rate plus certain fees, which makes it the best number for comparing offers. Lenders in Canada are required to disclose the cost of borrowing before you sign.

Since January 1, 2025, Canada’s criminal interest rate has been set at 35% APR, so lenders cannot legally charge more than that on most consumer loans. Even so, rates near that ceiling are very expensive — always compare several offers.

Example: How Much Does a Loan Really Cost?

Imagine borrowing $5,000 over three years. At 9% interest, the total interest is roughly $720. At 25%, it climbs to more than $2,100. The difference in rate can cost you more than a third of the original loan, which is why shopping around matters.

How to Compare Personal Loan Offers

• Compare the APR, not just the advertised rate.
• Check for origination, administration, or insurance fees.
• Ask whether there is a prepayment penalty if you pay the loan off early.
• Look at the total cost of borrowing over the full term.
• Read reviews and confirm the lender is licensed in your province.

Tips Before You Apply

Check your credit report for errors first, borrow only what you need, and choose the shortest term with a payment you can comfortably afford. A shorter term means higher payments but much less interest overall. Finally, avoid applying with many lenders at once, since multiple hard inquiries in a short period can lower your score.

The Bottom Line

A personal loan can be a smart, structured way to handle a large expense or simplify debt — as long as you understand the full cost and choose a payment that fits your budget. Take your time, compare offers, and read the agreement carefully before signing.

This article is for general information only and is not financial advice. Consider speaking with a qualified financial professional about your situation.

When you borrow money, one of the first questions a lender will ask is whether the loan is secured or unsecured. The answer affects your interest rate, how much you can borrow, how easy it is to get approved, and what happens if you fall behind on payments. Here is a clear breakdown of both types.

What Is a Secured Loan?

A secured loan is backed by collateral — something of value that you pledge to the lender. If you stop making payments, the lender has the legal right to take that asset to recover what you owe.

Common examples include:

• Mortgages, secured by your home
• Car loans, secured by the vehicle
• Home equity lines of credit (HELOCs)
• Secured credit cards, backed by a cash deposit
• Loans secured by savings or investments

What Is an Unsecured Loan?

An unsecured loan has no collateral. The lender approves you based on your creditworthiness — mainly your credit score, income and existing debts. If you default, the lender cannot automatically take a specific asset, but it can send the account to collections, report the missed payments to the credit bureaus, and potentially take legal action.

Examples include most personal loans, credit cards, student loans and unsecured lines of credit.

Side-by-Side Comparison

Feature	Secured Loan	Unsecured Loan
Collateral required	Yes	No
Typical interest rate	Lower	Higher
Ease of approval	Easier, even with weaker credit	Depends heavily on credit
Borrowing limits	Often higher	Usually lower
Risk to you	You can lose the asset	Credit damage and collections

Advantages of Secured Loans

Because the lender’s risk is lower, secured loans usually come with lower interest rates and larger loan amounts. They can also be a realistic option if your credit is limited or damaged, and making on-time payments can help you rebuild your credit history.

Disadvantages of Secured Loans

The biggest downside is the risk of losing your collateral. If your vehicle secures a loan and you fall behind, it can be repossessed. Secured loans may also involve extra steps, such as appraisals or registering the lien, which can add time and fees.

Advantages of Unsecured Loans

Unsecured loans are typically faster to process and do not put your property directly at risk. They are a good fit for moderate expenses when you have solid credit and steady income.

Disadvantages of Unsecured Loans

Expect higher interest rates, especially if your credit score is fair or poor. Approval can be harder, and borrowing limits are often smaller.

Which One Should You Choose?

• Choose a secured loan if you need a larger amount, want a lower rate, and are confident you can keep up with payments.
• Choose an unsecured loan if you need a smaller amount, have good credit, and do not want to risk an asset.

Whichever you choose, compare the APR and total cost of borrowing across several lenders, and never pledge an asset you cannot afford to lose.

This article is for general information only and is not financial advice.

Payday loans promise quick cash with minimal paperwork, which makes them tempting when money is tight before your next pay cheque. But they are also one of the most expensive ways to borrow. This article explains how payday loans work in Canada, what they cost, and what alternatives to consider before you apply.

How Payday Loans Work

A payday loan is a small, short-term loan — usually a few hundred dollars up to $1,500 — that you repay in full, plus fees, on your next payday. Lenders typically require proof of income, a bank account, and ID. Many will ask for a pre-authorized debit or post-dated cheque so they can collect payment automatically.

How Payday Loans Are Regulated

Payday lending in Canada is regulated by both the federal government and the provinces. As of January 1, 2025, federal rules cap the cost of a payday loan at $14 per $100 borrowed, and some provinces set even lower limits. Provinces also license payday lenders and set rules on things like rollovers, cooling-off periods, and how many loans you can have at once.

Before borrowing, confirm the lender is licensed in your province. You can usually check this through your provincial consumer protection office.

What a Payday Loan Really Costs

Fourteen dollars on $100 may not sound like much, but because the term is so short — often two weeks — the equivalent annual rate is extremely high, in the hundreds of percent. Borrow $500 at $14 per $100 and you would owe $570 two weeks later. If you cannot repay and take another loan to cover the first, those fees stack up quickly.

The Debt Cycle Risk

The biggest danger of payday loans is the cycle they can create. Repaying the full amount plus fees from one pay cheque can leave you short again, leading to another loan. Research by the Financial Consumer Agency of Canada has found that many payday borrowers take out more than one loan in a year.

Safer Alternatives to Consider First

• Talk to your creditor: utilities, phone companies and landlords may agree to a short payment extension.
• Ask your employer about a pay advance.
• Credit union small-dollar loans: some credit unions offer short-term loans at far lower cost.
• Overdraft protection or a line of credit from your bank, which is usually cheaper than a payday loan for short gaps.
• A credit card cash advance — still expensive, but often less costly than a payday loan for short periods.
• Non-profit credit counselling if you are regularly short of money and need help with a budget or debt plan.
• Government or community programs for emergency assistance in your province or city.

If You Do Use a Payday Loan

1. Borrow the smallest amount possible.
2. Read the agreement and confirm the total cost before signing.
3. Know your provincial cancellation (cooling-off) rights.
4. Plan exactly how you will repay it on the due date.
5. Avoid taking a new loan to pay off an existing one.

The Bottom Line

Payday loans can solve a short-term emergency, but they are costly and can easily become a cycle. Explore cheaper options first, and if you find yourself relying on short-term loans often, consider speaking with a non-profit credit counsellor about a longer-term plan.

This article is for general information only and is not financial advice. Rules vary by province; check your provincial regulator for current details.