“If we really want to help vulnerable Canadians, we need to do more than just adjust interest rates,” said Bruce Sellery, CEO of Canada Credit Bank. “We need to look at the big picture — offering more affordable loan options, Better financial support and the tools people need to take control of their finances. ”

The unintended consequences of low-interest payday loans

Here’s how the new loan changes impact Canadian borrowers and lenders:

borrower

While these changes are intended to help borrowers, they could end up making things more difficult for Canadians in the long term. With interest rates lower, lenders may be less willing to approve the number of loans they previously issued, tightening eligibility requirements and making it harder for Canadians and newcomers to Canada to qualify. This can push borrowers to make riskier choices, such as pawn shops, illegal lenders, or even unregulated overseas lending companies, and potentially leave them with more debt than they started with.

Another problem: Lower interest rates may give borrowers the wrong impression that loans are now “affordable.” This can lead them to delay seeking financial help from trusted organizations like Credit Canada and rely on high-interest loans, making their situation worse over time.

lender

For lenders, the new rules could lead to some tough decisions. One lender said it has turned down more loan applications because lower interest rates don’t leave enough room to take on the associated risks for some loan applicants. Non-prime lenders often serve people with lower credit scores and may reduce the number of loans they offer. That could make it harder for some Canadians to get credit when they need it most.

How do the new loan changes affect you?

Changes to criminal interest rates will impact how some people in Canada access credit. Borrowing may become more difficult for financially vulnerable Canadians, who often rely on payday loans or high-interest credit products. On the plus side, the change means lower interest rates on some loans, which could help alleviate financial stress for many borrowers.

However, there is a drawback. Having fewer credit options available may force some Canadians to turn to riskier, unregulated lenders. It puts the transparency of terms at risk, making things like high fees, hidden fees and repayment plans unclear.

The lack of consumer protections from such lenders puts borrowers at risk of falling deeper into debt. This means our efforts in financial literacy and planning are even more important.