Understanding Canada's 35% APR Cap
Learn about Canada's 2025 Criminal Rate of Interest law that caps loan APRs at 35%. Understand how this protects you and what it means for personal loans.
In 2025, Canada implemented a landmark consumer protection law that caps the Annual Percentage Rate (APR) on personal loans at 35%. This guide explains what this means for you as a borrower and how it protects you from predatory lending practices.
What is APR?
APR (Annual Percentage Rate) is the total yearly cost of borrowing money, expressed as a percentage. Unlike simple interest rates, APR includes all fees and charges, giving you the true cost of a loan. For example, a loan with 25% interest plus $500 in fees might have an APR of 32%.
💡 Pro Tip: Always compare loans using APR, not just the advertised interest rate.
Understanding the 35% Cap
The Criminal Rate of Interest in Canada now limits the maximum APR to 35% for personal loans. Any lender charging more than this rate is breaking the law. This applies to most personal loans, lines of credit, and installment loans.
💡 Pro Tip: This cap doesn't apply to payday loans under $1,500, which have separate provincial regulations.
How This Protects You
Before this law, some lenders charged rates of 40-60% APR or higher, trapping borrowers in cycles of debt. The 35% cap ensures that even borrowers with bad credit can access loans at reasonable rates that won't lead to financial ruin.
💡 Pro Tip: If a lender offers you a rate above 35% APR, report them to your provincial consumer protection office.
What's Included in APR Calculations
Canadian lenders must include all mandatory fees in their APR: interest charges, administrative fees, insurance premiums (if required), and any other compulsory charges. Optional fees may be excluded.
💡 Pro Tip: Ask for a full breakdown of all fees before signing any loan agreement.
Comparing Loan Offers
When shopping for loans, use APR as your primary comparison metric. A loan advertising '25% interest' with high fees could have a higher APR than one advertising '30% interest' with no fees.
💡 Pro Tip: Use our loan calculator to compare the true cost of different offers.
Your Rights as a Borrower
You have the right to full disclosure of APR before signing, a cooling-off period for certain loans, and the ability to file complaints with the Financial Consumer Agency of Canada (FCAC) if you believe a lender has violated the law.
💡 Pro Tip: Keep copies of all loan documents and communications with lenders.
Additional Tips for Success
- The 35% APR cap took effect in 2025 as part of consumer protection reforms
- Credit cards and mortgages have different regulations and may have different rate caps
- Always get loan offers in writing before making decisions
- If you're offered a rate above 35%, walk away and report the lender
- Use comparison tools to ensure you're getting a competitive rate within legal limits
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