Canada has new rules for high-interest loans—here they are

“If we really want to help vulnerable Canadians, we need to do more than just fix interest rates,” said Bruce Sellery, Credit Canada CEO. “We need to look at the bigger picture—providing affordable loan options, better financial support, and the tools people need to manage their finances.”

Unintended consequences of low interest payday loans

Here’s how the new loan changes could affect borrowers and lenders in Canada:

Borrowers

While these changes are intended to help borrowers, they could end up making things more difficult for Canadians in the long run. With lower rates, lenders are less likely to approve their previous loan amount, tightening eligibility requirements and making it harder for Canadians and those new to Canada to qualify. This can push borrowers into risky choices such as thrift stores, illegal lenders, or unregulated offshore loan companies and leave them with more debt than before.

Another issue: lower interest rates may give borrowers the wrong impression—that mortgages are now “affordable.” This may cause them to delay seeking financial help from trusted organizations, such as Credit Canada, and rely on high-interest loans, making their situation worse in the long run.

Lenders

For lenders, the new rules can lead to some difficult decisions. One lender shared that he is already turning down more loan applications because the low interest rates don’t leave enough room to cover the associated risks of other loan applicants. Subprime lenders, who tend to help people with low scores, may reduce the amount of loans they offer altogether. This can make it difficult for some Canadians to access credit when they need it most.

How do the new loan changes affect you?

Changes in the delinquent interest rate will affect how some Canadians can access credit. For financially vulnerable Canadians, who often rely on payday loans or high-interest credit products, borrowing can be very difficult. On the bright side, the change means lower interest rates on mortgages, which could help ease financial hardship for many borrowers.

However, there is a downside. Fewer credit options available may drive some Canadians to riskier, unregulated lenders. It puts policy transparency at risk, making things like high fees, hidden charges and payment plans unclear.

These types of lenders have no consumer protections, leaving borrowers at risk of going deeper into debt. This means that our financial literacy and planning efforts are very important.