Canada's interest rate ceiling and what it covers

Canada's interest rate ceiling is 35% per year. That is the criminal rate of interest under section 347 of the Criminal Code, in force since 2025-01-01, and it is measured by a defined method that aggregates interest and certain charges — not by the headline rate printed on your contract.

So that is the short answer. The useful answer takes a few more paragraphs, because the ceiling does not attach to every kind of loan in the same way, and because a loan priced just under the limit can still be an expensive mistake.

One disclosure before we go further: LoanGoose is a loan matching and comparison service, not a lender. We do not make loans, set rates, or make credit decisions. What we can do is explain the rules you are borrowing under.

What the 35% ceiling actually covers

The Criminal Code s. 347 — criminal rate of interest sets 35% per year as the criminal rate, in force since 2025-01-01. The detail that catches people out is how that number gets measured.

The law uses a defined method that aggregates interest and certain charges. Read that slowly, because it is the whole point. The cost of borrowing is totalled up, and if the total crosses the line, a modest-looking advertised rate does not rescue the lender. Charges attached to the borrowing can be pulled into the calculation rather than sitting politely outside it.

That matters most in a few places:

• Short-term instalment loans. Small principal, short term, high cost of borrowing. These sit closest to the line, which is why the measurement method matters so much.
• Renewals and rollovers. Extend a loan and stack on new charges, and the aggregate grows. A loan that started inside the limit can drift past it.
• Add-ons tied to the borrowing. Depending on how the calculation treats them, charges connected to the loan can count toward the total.

None of this is a technicality. It is the difference between a rate cap and a true cost cap.

Payday loans: a different ceiling, often a lower one

Payday lending runs on its own rule set. Where a province operates a licensed payday lending regime, the Payday Lending Regulations, SOR/2024-114 cap the cost of borrowing at $14 per $100 advanced. A province may set a lower cap, and where it does, the lower figure applies.

A payday loan is generally up to $1,500 for a term of 62 days or less. It is a narrow product, built for speed, and it is the one where the phrase "cost of borrowing" matters most — because the borrower is usually deciding in a hurry.

Quebec does not license payday lending, which effectively prohibits the model there. So the payday ceiling in Canada is really a patchwork: $14 per $100 as the federal reference point, lower in some provinces, and no licensed version at all in Quebec.

The FCAC's page on FCAC — payday loans explains how the product works and what rights you have as a borrower.

How the ceiling applies across loan types

The same federal number does not do the same job everywhere. Here is a rough map:

Where other rules matter more than the ceiling

On a mortgage, 35% is rarely the binding constraint. Rates sit far below it. What shapes what you can actually borrow is underwriting: federally regulated mortgage lenders generally work to a total debt service ratio ceiling of about 44% and apply a qualifying stress-test rate above the contract rate, per OSFI Guideline B-20 — residential mortgage underwriting. Canadian fixed-rate mortgages are also compounded semi-annually by law, which is why the quoted rate and the effective annual cost are not identical numbers.

On secured borrowing, the limits are structural rather than interest-based. At federally regulated lenders, a home equity line of credit is generally limited to 65% of appraised property value, with total secured lending usually capped at 80%. The FCAC's FCAC — mortgages page is a reasonable place to start.

What the ceiling does not do

The ceiling is a maximum, not a benchmark, and it is not a green light. A loan priced just under the line is lawful and still a poor decision for many households. Here is what the 35% figure does not give you:

• It does not set your rate. Your rate depends on your credit history, your income, and the lender's own pricing.
• It does not cover every charge. Late payment fees, NSF fees and collection costs can live outside the borrowing calculation.
• It does not cap how much you can borrow. That is a lender decision based on affordability.
• It does not make a loan repayable. A legal loan you cannot afford is still a problem, and the consequences land on you.

It is also worth knowing what shows up on your file afterwards. A consumer proposal stays on a credit report for three years after completion, or six years from filing, whichever comes first. A first bankruptcy stays on a credit report for six years after discharge. Canada has two national credit reporting bureaus — Equifax Canada and TransUnion Canada — and a free copy of your credit report is available from each. The FCAC explains how in FCAC — credit reports and scores.

If you think a lender broke the rule

If you believe a lender has charged more than the law allows, or has treated you unfairly, there are established channels. Start with the lender in writing, and keep a copy of everything.

• Federally regulated financial institutions. Consumer complaints are handled by the Financial Consumer Agency of Canada — see FCAC — complaints.
• Most other lenders. Provinces license and supervise them, and each has a consumer protection office. The FCAC keeps a directory at FCAC — provincial and territorial regulators.
• Debt already in trouble. Only a licensed insolvency trustee can administer a consumer proposal or a bankruptcy. Trustees are regulated by the Office of the Superintendent of Bankruptcy Canada.

For anything significant — restructuring debt, weighing a proposal against a bankruptcy, or negotiating hard with a lender — talk to a licensed professional who can look at your actual numbers. Rules are general. Your situation is not.

The bottom line

Canada's interest rate ceiling is 35% per year, measured by a method that aggregates interest and certain charges. Payday lending sits under a separate cap where provinces license the model: $14 per $100 advanced federally, lower if a province says so, and effectively off the table in Quebec. Beneath those ceilings, the rules that shape your borrowing are about affordability — stress tests, debt service ratios, and whether the payment actually fits your budget.

A ceiling tells you where the law draws a line. It says nothing about whether the loan on the table is a good idea. That part is yours to judge, and it is worth taking the time on.

LoanGoose is a loan matching and comparison service, not a lender. The lowest rates are only available to the most qualified applicants.