Purchasing goods or services on credit involves costs. Usually, the longer the term to reimburse your loan, the higher the costs.

Credit charges

Credit charges include all of the fees you will have to pay, in addition to the amount that is financed. Credit charges include interest, administration fees, brokerage fees, insurance (other than automobile insurance, among other things), etc. Check how much these credit charges add up to. They are also expressed as an annual percentage: the credit rate.

The real cost of a credit purchase

Think about checking how much your instalment sale contract, i.e. your financing agreement, will really cost you. Is it worth purchasing a $2,000 item but have to reimburse $2,500 in total, for example? This latter amount represents your total contractual obligation, namely the amount you will have to reimburse. It includes the amount financed and all of the credit charges.

Evaluating your ability to pay

Merchants who sell you goods or services, or those who finance your purchase (if they approved the contract) are required to evaluate your ability to pay. To find out more, refer to the page titled Evaluating One’s Ability to Pay.

Even if a merchant agrees to sell you goods or services on credit, it would be wise for you to do your own evaluation of whether or not you will be able to reimburse this credit. To do so, you can consider the total amount you will have to reimburse and your other financial obligations.

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Last update : July 28, 2020

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The information contained on this page is presented in simple terms to make it easier to understand. It does not replace the texts of the laws and regulations.