In Canada, the maximum cost of borrowing is regulated by the federal government through the Office of the Superintendent of Financial Institutions (OSFI) and the Financial Consumer Agency of Canada (FCAC). The maximum cost of borrowing is known as the annual percentage rate (APR), and it is the total cost of borrowing, including interest and any additional fees, expressed as a percentage of the loan amount.
The maximum APR for most types of consumer loans in Canada is 60%. This includes loans such as personal loans, credit cards, and lines of credit. The APR for mortgages, however, is not capped.
However, the costs of borrowing can be hidden in various ways. One way is through the use of compounding interest, which can make the total cost of borrowing much higher than the stated interest rate. Additionally, some lenders may charge fees or penalties that are not included in the APR, such as late payment fees, balance transfer fees, or prepayment penalties. These fees can significantly increase the total cost of borrowing, making it difficult for consumers to compare the true cost of loans. Be very careful when a company (not bank) offers to consolidate your credit card loans for less.
To avoid hidden costs, it is important for consumers to carefully read and understand the terms and conditions of any loan they are considering, including the APR, and any additional fees or penalties. It is also important to compare the rates and terms of different lenders to ensure you get the best deal.
You must be willing to add up all the fees listed in the fine print of the contract BEFORE you sign it. 60% is far more than the credit card 25%.