The 35% APR cap on personal loans: how Canada's criminal interest rate works

For any personal loan agreement made on or after 1 January 2025, a Canadian lender may not charge or receive interest above 35% APR, and "interest" under section 347 of the Criminal Code counts fees, commissions, penalties and similar charges, not just the stated rate. The only consumer exceptions are narrow: licensed payday loans in designated provinces (limited instead to $14 per $100 borrowed) and small pawn loans under the Criminal Interest Rate Regulations. A loan with a "29.9%" rate can still break the cap once a deducted fee is counted, so the test is always the APR on the money you actually receive.

This guide belongs to the personal loan requirements and APR overview. It is general information, not legal advice.

What changed in 2025

Before 2025 the criminal rate was 60% expressed as an effective annual rate, which already includes compounding. Parliament lowered it and changed the measure:

The government's own regulatory analysis pointed out that 35% APR is roughly 41.2% as an effective rate, so the cut was steeper than the headline figure suggests. Many high-cost instalment lenders, which previously priced loans between 35% and the old limit, had to reprice or restructure.

The new limit applies to agreements entered into from 1 January 2025. A loan signed in 2024 was measured against the old limit; if an old loan was renewed, refinanced or increased after that date, ask a lawyer how the new rule applies.

What counts as interest

Section 347 defines interest as the total of all charges and expenses paid or payable for advancing credit, whether called a fee, fine, penalty or commission. It excludes repayment of the principal and certain items such as:

• official fees needed to register security (for example a PPSA registration),
• certain insurance charges for insuring the lender's risk, where the insured amount does not exceed the credit advanced,
• small overdraft charges by certain deposit-taking institutions,
• property taxes collected on a mortgage.

The APR you see on a disclosure statement is calculated under consumer disclosure rules and may treat some items differently from the Criminal Code, so check both. The rate is measured on the credit advanced, which is the money you actually receive after required deposits and deducted fees. The Code says the APR is calculated using generally accepted actuarial practices and principles.

Testing three offers

All figures are illustrative. Each assumes equal monthly payments.

Offer 1: $2,000 for 12 months at 29.9%, with a $200 fee deducted. The payment on $2,000 is about $194.88. You receive $1,800. Solving for the rate that makes 12 payments of $194.88 repay $1,800 gives an APR of about 51.3%. Even though the stated rate is under 35%, the offer exceeds the limit.

Offer 2: $3,000 for 24 months at 32%, with a $150 fee deducted. Payment about $170.84; cash received $2,850; APR about 37.7%. Over the limit.

Offer 3: $8,000 for 48 months at 19.99%, with a $400 fee deducted. Payment about $243.40; cash received $7,600; APR about 22.95%. Within the limit, but almost 3 points above the stated rate.

Notice how fees bite harder on small, short loans. A $150 fee on a $3,000 loan at 20% gives an APR of about 30.0% over 12 months but about 23.8% over 36 months, because the fee is spread over fewer payments. Lenders near the cap often keep stated rates just under 35% and rely on optional add-ons; check whether any add-on is truly optional before treating it as outside the APR.

You can calculate payments with the personal loan calculator, then use a spreadsheet's RATE function on the cash you receive, as shown in calculating APR when fees are deducted.

The exceptions that matter to consumers

Payday loans. Section 347.1 exempts a payday loan of $1,500 or less for a term of 62 days or less, made by a licensed lender in a province the federal government has designated because it limits the total cost of borrowing. Since 2025 the Criminal Interest Rate Regulations set the maximum for the exemption at $14 per $100 borrowed. That still equals an APR of about 365% on a 14-day loan. See payday loans in Canada.

Pawn loans. Small pawn loans under $1,000 that meet the regulation's conditions may go up to 48% APR.

Business loans. The commercial exemptions in the regulations apply only to borrowers who are not natural persons. A loan to you personally stays under 35%, even if you use it for a side business.

If your loan seems to exceed 35%

1. Gather the agreement, the disclosure statement and every payment record.
2. Recalculate the APR on the cash you received, including all fees the lender required.
3. Complain in writing to the lender and ask it to explain the APR.
4. Contact your provincial consumer protection office for a non-bank lender, or follow the bank complaint process; see complaints to OBSI and the FCAC.
5. Get legal advice before you stop paying. Courts usually reduce the interest to a legal level rather than cancelling the debt; in Transport North American Express Inc. v. New Solutions Financial Corp. (2004) the Supreme Court of Canada approved this "reading down" approach. The principal is still owed.

Other rules that still apply under 35%

• The Interest Act section 4: if a contract states a rate only per day, week or month without the yearly equivalent, no more than 5% a year is recoverable (with exceptions such as mortgages on real property).
• Provincial high-cost credit rules in provinces such as Alberta, Manitoba, British Columbia and Quebec add licensing, disclosure and cancellation rights for loans above their thresholds; see high-cost instalment lenders.
• Unconscionability: courts and, in Quebec, the Consumer Protection Act can reduce obligations that are excessive or harsh; see Quebec rules.

Frequently asked questions

Does the 35% cap apply to credit cards and lines of credit?

Yes. Section 347 applies to all credit, including cards and lines of credit, although the APR on a card is calculated on the balances and charges actually incurred.

Is a 34.9% loan "safe" because it is legal?

Legal does not mean affordable. A $3,000 loan at 34.9% over 3 years costs about $1,879 in interest, compared with about $587 at 12%.

Can a lender add insurance to get around the cap?

Certain insurance charges are excluded from "interest" only if they meet the Code's conditions. If insurance was presented as mandatory or is unusually priced, ask the lender to justify it and seek advice; see loan insurance add-ons.

Where is the official text?

The Criminal Code and the Criminal Interest Rate Regulations are on the Justice Laws Website; the regulations and their impact analysis were published in the Canada Gazette (SOR/2024-114).

Sources

• Justice Laws Website — Criminal Code ss. 347 and 347.1, Criminal Interest Rate Regulations, Interest Act
• Canada Gazette — SOR/2024-114 and its regulatory impact analysis statement
• Financial Consumer Agency of Canada — consumer information on high-cost loans
• Supreme Court of Canada — Transport North American Express v. New Solutions Financial Corp.