RRSP vs. RSP
Often the the terms RSP and RRSP are used interchangeably, which can be correct, but it depends on the context.
Loans Canada: The Country's Best Loan Comparison Platform
As a Canadian consumer, there are plenty of different credit products that you can use to borrow and even more businesses to buy them from. The only problem is that not all of these lending sources are upfront about the overall conditions of the product you would be applying for, particularly when it comes to the costs.
If you’re not careful, you might even fall victim to illegal interest rates, absurdly high fees or other scams. Want to know how to protect your finances against predatory lenders? Then check out this list of 5 ways your lender might be screwing you.
One of the most common ways that a lender will try to take advantage of you is by charging you ridiculously high fees without your knowledge. To remain semi-legitimate, they may hide their fees somewhere in the fine print of your contract, claiming that these costs are for various administrative services, such as:
Check out much you may end up paying on your mortgage prepayments.
Whether or not the lender declares these kinds of fees upfront, the goal is always to get as much of your money as possible in exchange for an overpriced, usually subpar credit product or nothing at all (during cases of fraud).
In reality, you are not obligated to purchase insurance for a personal loan. Plus, it’s illegal for a lender to ask for any kind of payment before you receive your loan funds. Always read the fine print and speak to a professional financial advisor before you give away any information to a lender that you think might not be trustworthy.
Another way that lenders will try to screw you is by charging borderline illegal interest rates. According to the Criminal Code of Canada, lenders are allowed to impose rates of up to 60% interest for their products. To act like they’re giving you a great deal on a loan, a lender might offer you a “much lower” rate; let’s say 46%. Seems fair, doesn’t it?
However, interest can be tallied up in several ways. If you go by the federally mandated calculation system, a 46% interest rate adds up to just under 60% APR. Sadly, these high rates, coupled with exorbitant fees and long repayment terms can mean you’ll pay more than half of your actual loan amount in interest alone. Even if you pay early, you might still be subject to a number of fees, which would simply balance out the equation.
High rates are a frequent issue seen with alternative lenders, who take in clients that can’t get approved by banks or credit unions because they have bad credit, debt problems or a low income. To justify their ridiculous rates, the lender will claim that they’re taking on risk by approving you since you have more chance of defaulting.
Because alternative lenders are regulated by the provincial or territorial government, it’s tougher to find one that won’t charge you an arm and a leg for their products. On the other hand, there are times when the Bank of Canada’s interest rates are under 1% so, if you can qualify, a major lending company, like a bank, is generally a safer option.
Check out what bad credit lenders look at when assessing loan eligibility.
Remember, almost every credit product comes with fees to compensate for any administrative or financial services the lender must perform. That said, there’s a big difference between charging customers for an employee’s time and robbing them blind. Here are some of the other fees that some lenders will apply to your final bill:
Basically, if you don’t make your scheduled payment in full or there aren’t sufficient funds in your bank account when your lender withdraws a pre-authorized debit payment, you might be subject to a combination of these fees.
Some lenders will also tack extra interest onto your debt and report your payments to Canada’s credit bureaus, which can lead to a drop in your credit score. Watch out, because these kinds of fees and penalties are technically legal for a Canadian lender to charge. Once again, to remain “transparent” about their products, odds are the lender will hide their fees within the fine print of their website and contracts.
Check out when lenders may charge you loan origination fees.
As mentioned, many lenders disguise their intentions by advertising that they are otherwise upfront about the way they do business. They may try to reel you in with:
Always take your lender’s website or offers with a grain of salt. While it can be hard to get approved with a bank or credit union when you’re considered a high-risk client, the rates and fees you end up paying for an alternative credit product might not be worth it.
Some lenders also advertise themselves as brokerages that help you find the best credit products and rates. Of course, the other lending sources they connect you with are part of their own network, so they make all the profits. Since they’re technically a third-party company, chances are they’ll charge you for brokering the deal too.
Then, once you’ve consented to whatever product they sell you on, you’ll be subject to all kinds of other fees, rates, and obligations from yet another shady lending business. Unfortunately, when all of these different expenses are added to the final loan amount, very few consumers could actually afford to pay off their debt and still get by.
Check out which loans you should avoid in Canada.
Some lending businesses are difficult to regulate, which allows them to bypass federal rules and overcharge you for products that may not help you in the first place. This kind of situation gets even more tricky when you consider how hard it can be to qualify for credit with a bank or credit union. Remember, just because a lender or brokerage offers you a “good deal”, it doesn’t mean they’re looking out for you.
Don’t worry, if you think that a lender is trying to screw you out of your money, there are resources you can contact. If you’d like to file a complaint against a federally regulated lender, check out this page on the Government of Canada website.
If you’re dealing with a provincially or territorially mandated lender, look at this list of Federal oversight bodies and other regulators. For any other information about lenders, interest rates and credit products in your area, check out our lender directory.
Rating of 5/5 based on 3 votes.
Save time and money with Loans Canada. Research and compare lenders before you apply. Share your experiences with Canada's top lenders.
Whether you have good credit or poor credit, building financial awareness is the best way to save. Find tips, guides and tools to make better financial decisions.
Often the the terms RSP and RRSP are used interchangeably, which can be correct, but it depends on the context.
Trustees are seeing a 47% drop in the number of bankruptcies across the country and a 35% drop in consumer proposals.
All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster. Loans Canada and its partners will never ask you for an upfront fee, deposit or insurance payments on a loan. Loans Canada is not a mortgage broker and does not arrange mortgage loans or any other type of financial service.
When you apply for a Loans Canada service, our website simply refers your request to qualified third party providers who can assist you with your search. Loans Canada may receive compensation from the offers shown on its website.
Only provide your information to trusted sources and be aware of online phishing scams and the risks associated with them, including identity theft and financial loss.