Personal loans: know your rights

From: Financial Consumer Agency of Canada

Express consent for a personal loan

Federally regulated financial institutions can only provide you with a loan if they have your express consent. If you give verbal consent, they must provide you with confirmation of your consent, in writing, without delay.

Learn more about giving express consent for financial products and services.

Your right to information about personal loans

Federally regulated financial institutions must provide you with information about your personal loan in a manner, and using language, that is clear, simple and not misleading. The information disclosed depends on the type of loan you get.

Before you sign a loan agreement, take the time to read and understand the terms and conditions. Ask questions if anything is unclear or if you’re not sure about what you’re signing.

Information about fixed rate personal loans

When federally regulated financial institutions issue a fixed rate personal loan, they must disclose certain information.

They must provide this information in a disclosure statement that is:

  • part of the application
  • part of the loan agreement, or
  • set out in a separate disclosure statement

Certain information must be provided in an information box. It can be at the beginning of your loan agreement or the separate document you receive with it. If you’re dealing with a bank, they must present it in a single prominently displayed information box.

This includes information such as the:

  • principal: amount that you’re borrowing
  • advance(s): the date on which they’ll advance your funds and the date they’ll start charging interest
  • payments: amount of each payment, its due date and frequency, and a brief description of its components. For example the principal, interest, other charges
  • term:
    • number of months or years of your term
    • whether it’s open or closed
    • brief explanation of what open or closed means (as applicable)
  • amortization period: number of month or years it will take to pay off the loan, if it’s different from the term of the loan
  • annual interest rate: interest rate they’re charging on your loan and how the interest is calculated (if applicable)
  • annual percentage rate (APR): annual cost, expressed as a percentage of the amount you’re borrowing if different from the annual interest rate
  • other charges: types and amounts of any other charges that might apply other than interest charges. For example a fee for insufficient funds

See an example of an information box in a personal loan agreement.

Additional information about fixed rate personal loans

In addition to the information box, federally regulated financial institutions must provide information such as:

  • the total amount of all your payments at the end of the term
  • of that total, how much you will have paid in other charges at the end of the term. For example administrative charges, charges for a broker or for appraisal, if applicable
  • the fact that they’ll apply your payments to the interest and other charges first and then to the principal
  • information about any optional service you accepted. They must also tell you:
    • how much they cost
    • the conditions for cancelling this service if they didn’t provide this information already in a separate statement
  • a description of the property you provided as security for the loan, if any

Information about variable rate personal loans

When federally regulated financial institutions issue a variable rate personal loan, they must disclose certain information.

They must provide this information in a disclosure statement that is:

  • part of the application
  • part of the loan agreement, or
  • set out in a separate disclosure statement

Certain information must be provided in an information box. It can be at the beginning of your loan agreement or in the separate document you receive with it. If you’re dealing with a bank, they must present it in a single prominently displayed information box.

The information box must include the same information your lender must disclose for a fixed rate loan, as listed above.

They must also provide:

  • the annual interest rate that applies on the date of the initial disclosure statement
  • a brief description of the method they used to calculate the annual interest rate
  • the date the calculation was made

Additional information about variable rate personal loans

In addition to the information box, your lender must disclose information such as:

  • the amount of each payment based on your interest rate at the date of signing, and when they’re due
  • the amount that represents the cost of borrowing (principal, interest and other charges) that you’ll pay during the term
  • if interest variations link to another rate, such as the prime rate, at least once a year, a statement with:
    • the interest rate and unpaid balance at the beginning and end of the period that the statement covers
    • each payment due for the upcoming period. They’ll base this on an estimate using the interest rate in effect on the date of the disclosure statement

For variable rate loans with fixed payments, they must also include the following in the agreement or disclosure document:

  • the annual interest rate at which your payment wouldn’t cover the interest due for the period (trigger rate)
  • the fact that the interest rate may increase during your term. In that case, the time it takes to pay your loan will be longer

Learn more about personal loans.

Display of information about credit agreements

Banks must disclose required information about credit agreements by:

  • making it available:
    • at each of their branches in Canada and points of service
    • on each of their websites through which they offer products or services in Canada
  • providing it to you, upon request

When these rights apply to you

These rights apply when you’re dealing with a federally regulated financial institution like a bank or federal credit union.

Find out if your financial institution is federally regulated.

Learn more about how your banking rights are protected.

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