When you borrow money, you have to pay credit charges in return. You may be interested in the following information.

The credit charges and rates are included in your loan contract and are therefore to be considered when reimbursing your loan.

What are credit charges?

Credit charges include all of the fees you have to pay, in addition to the amount borrowed. Among other things, they include:

  • interest;
  • death or disability insurance;
  • administration, brokerage or storage fees;
  • the value of a discount granted to a consumer who pays cash.

The amount of the credit charges must be indicated in your contract.

What is the credit rate?

In your contract, the credit charges are also expressed as an annual percentage: the credit rate. There is only one case where merchants can change this rate: you entered into a contract with a variable rate.

The credit rate must remain unchanged for the entire term of the contract. The credit rate is used to calculate the maximum credit charges you will have to pay over the course of your contract.

If your contract provides for one payment per month, you will usually have to make the 1st payment one month after signature. If your contract provides for one payment per week, you will in many cases have to make the 1st payment one week after signature.

Period with no credit charges

Is the date of your 1st payment set at more than 35 days after signature? The credit charges do not accrue between the date on which you signed the contract and the start of the period in which the 1st payment is due.

You are entering into a contract on July 20 for which the 1st payment is due on November 20 of the same year. If the contract provides for one payment per month, the credit charges will begin to accrue on October 20.

Frequency of payments

After the 1st payment, at least one payment must be made every 35 days. The payments must be equal amounts. Only the final payment may be smaller.

Reimbursement before maturity

At any time, you may reimburse your loan before maturity. Doing so will save you credit charges and no penalties may be imposed.

Do you have any late payments? The lender could enforce a clause called “forfeiture of benefit of the term,” on condition that such a clause is included in your contract. The lender would then send you a “Notice of Forfeiture of Benefit of the Term” and a statement of account.

The notice must comply with the standard model provided in the Regulation respecting the application of the Consumer Protection Act (s. 69.0.2).

Responding to the notice

Upon receipt of the notice, you have 30 days to pay the late payments.

You can also petition the court to have your loan payment terms changed. In deciding whether such a change is possible, the court will take into account:

  • the total amount you have to reimburse according to your contract;
  • the amounts you have already paid;
  • the amount you have left to pay;
  • your ability to pay;
  • the reason why you are not making your payments.

What happens if you were unable to make the late payments within 30 days of receiving the notice and you did not file a petition with the court? The lender is then entitled to demand payment of the balance of your total obligation, i.e. everything you have left to pay.

Particularity of pawnbroking

A pawnbroker may use the “forfeiture of benefit of the term” clause without sending you a notice or a statement of account if he or she abides by the following condition. The amount you received, considering the contract entered into and all others entered into in the previous 30 days, is $500 or less. In such cases, the manner in which to respond to the lender’s demands presented above does not apply.

Court proceedings

If your contract does not include a “forfeiture of benefit of the term” clause, the lender is still entitled to claim any late payments. The lender could even institute court proceedings against you.

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