There is a cost to borrowing money. Two factors affect the cost of a loan: the applicable credit rate and the term of the loan. The higher the rate and the longer the term, the higher the cost.

Credit charges

Borrowing money involves credit charges. They include all of the fees you will have to pay, in addition to the amount of the loan. Credit charges include interest, administration fees, brokerage fees, storage fees, insurance (other than automobile insurance), 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 loan

Think about checking how much your loan will really cost you. Is it worth borrowing $2,000 but to have to reimburse $2,500 in total? This latter amount represents your total obligation, namely the amount you will have to reimburse. It includes the amount borrowed and all of the credit charges.

Evaluating your ability to pay

The lender is required to evaluate your ability to reimburse the loan. To find out more, refer to the page titled Evaluating One’s Ability to Pay.

Even if a lender agrees to lend you a certain amount of money, it would be wise for you to do your own evaluation by considering the cost of your loan and your other financial obligations, and determining whether or not you can reimburse this loan.

Last update : October 23, 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.