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Your Rights When You Borrow Money in Canada

Nearly everyone borrows money at some point, and many people borrow money quite often. Whether you’re borrowing to pay for a car, vacation, home, or anything else, it’s important to remember that you have rights when you borrow money in Canada. Understanding these rights can keep you from being taken advantage of. It’s important to understand your rights so that you can protect yourself and take steps to ensure you don’t get into trouble.

Information You Are Required to Receive When Borrowing Money

Federally regulated financial institutions (such as banks, trust companies, loan companies, life insurance companies, and other such institutions) are required to provide you with specific information about any loan or line of credit that you receive. The information that you must be provided depends on the type of loan.

  • Lines of Credit
    • Information on your line of credit must be included in an “information box” at the beginning of your credit agreement or in a second document provided at the same time. This information box must include the initial interest rate (if known), the annual interest rate, the date from which interest is charged, the minimum payment during each payment period, as well as details on any annual fees or other fees that you may be charged.
    • The financial institution must also provide you with another disclosure statement (at least once a month) that details the current information on your line of credit.
  • Credit Cards
    • You must be provided with information that makes it easier for you to understand the terms of your credit card agreement when you apply for a credit card, when you receive your credit card, when your credit agreement changes, and on your monthly credit card statement.
    • For instance, when you apply for a credit card you must be provided details on the card’s interest rate as well as information on any other charges that may apply.
    • On your monthly statement, you must be clearly provided details on your outstanding balance, the approximate amount of time it will take you to pay off your balance if you only make the minimum payments, a description of each transaction made on the card in the last month, and details on any interest, fees or other charges.
    • For more information on credit cards and your rights, please read our article on understanding credit cards.
  • Personal Loans
    • When you apply for a personal loan, the financial institution must provide important details in an “information box” at the beginning of your loan document or in another document received at the same time.
    • This information box must include the amount being borrowed, the interest rate, the term, the annual cost of the loan, the date on which you will start being charged interest, the amortization period, any other fees that you will be charged, and other important details.
  • Mortgages
    • The information that you must be provided when applying for a mortgage will depend on the type of mortgage you get.
    • In general, you must be provided with information on how much you are borrowing, the interest rate being charged, the term of the mortgage, the amortization period, the date you will start being charged interest, other fees that may apply, as well as other information.

If you feel that your rights are not being respected when you borrow money in Canada, you should contact the Financial Consumer Agency of Canada.

Payday Loans and Your Rights

Payday loans are short-term loans that function as cash advances. They are designed to help cover expenses “until payday.”

Specific information regarding payday loans and how they are regulated will depend on the province in which you live. Many provinces have regulations in place for payday loans, but they vary.

Most provinces have restrictions in place for how much interest payday lenders can charge, and many require that payday lenders provide you with explicit information on your loan in a prominent spot on your loan agreement.

Payday loans can be a very expensive way to borrow money and can result in serious debt problems if you are not able to pay the loan back when it is due. For more information, please read our article on your rights when you receive a payday loan.