If your deal is small, or your borrower is a person, 35% APR is the ceiling, and your fees count. Canada's criminal rate dropped from 60% effective annual rate to 35% APR on 1 January 2025 under section 347 of the Criminal Code (Lexology).
The three questions to ask every time
- Who is borrowing? An individual is always capped at 35% APR.
- What is it for? The commercial exemptions need an entity borrower and a business or commercial purpose.
- How much? Commercial loans over $10,000 and up to $500,000 are capped at 48% APR; above $500,000 there is no cap (Torys).
A quick worked example
A broker arranges a $150,000, six-month second mortgage to an individual at 14% with a 4% lender fee and a $1,500 admin fee.
- Interest for six months: $10,500
- Lender fee: $6,000
- Admin fee: $1,500
- Total cost of credit: $18,000 over six months
That is 12% of the advance in half a year, roughly 24% on a simple annualized basis before any actuarial adjustment. It passes. Now shorten the term to three months with the same fees: interest falls to $5,250, total cost is $12,750 in three months, about 34% annualized. A few more fees and it fails. Have your accountant or counsel run the actual APR calculation under generally accepted actuarial practices, as the statute requires.
Three common mistakes
- Forgetting fees. Section 347 counts lender fees, bonuses and similar charges as interest.
- Assuming a corporate borrower is enough. The loan must also be for a business or commercial purpose.
- Short-term renewals. Renewal fees on short terms can push APR up fast. Test every renewal.
This content is general information for industry professionals and is not legal, tax or financial advice. Laws change and apply differently to each transaction; obtain advice from qualified counsel in each relevant jurisdiction. Legal counsel to the Cross-Border Private Lenders Association: Jasmine Daya & Co. Questions: info@cbpla.com