“If we really want to help vulnerable Canadians, we need to do more than just adjust interest rates,” says Bruce Sellery, Credit Canada CEO. “We need to look at the bigger picture—offering more affordable loan options, better financial support, and the tools people need to take control of their finances.”
The unintended consequences of lower-interest payday loans
Here’s how the new loan changes can affect both borrowers and lenders in Canada:
Borrowers
While these changes are intended to help borrowers, they might end up making things more difficult for Canadians in the long run. With lower rates, lenders are likely less willing to approve the number of loans they did previously, tightening eligibility requirements and making it harder for Canadians and those new to Canada to qualify. This could push borrowers toward riskier choices like pawn shops, illegal lenders, or even overseas loan companies that aren’t regulated and could leave them with more debt than they started with.
Another issue: the lower interest rates might give borrowers the wrong impression—that loans are now “affordable.” This could cause them to delay seeking financial help from trusted organizations, like Credit Canada, and rely on high-interest loans, making their situation worse over time.
Lenders
For lenders, the new rules could lead to some tough decisions. One lender shared that it is already turning down more loan applications because the lower interest rates don’t leave enough room to cover the associated risks of some loan applicants. Non-prime lenders, which typically serve people with lower credit scores, may reduce the number of loans they offer altogether. This could make it harder for some Canadians to access credit when they need it most.
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How do the new loan changes affect you?
The changes to the criminal interest rate will impact how some people in Canada can access credit. For financially vulnerable Canadians, who often rely on payday loans or high-interest credit products, borrowing can become more difficult. On the positive side, the change means lower interest rates on certain loans, which could help reduce financial strain for many borrowers.
However, there is a downside. Fewer available credit options may drive some Canadians to riskier, unregulated lenders. It puts transparency of terms at risk, making things like high fees, hidden charges and repayment plans unclear.
These types of lenders lack consumer protections, leaving borrowers at risk of falling deeper into debt. This means that our efforts for financial literacy and planning are even more critical.