The Canada Revenue Agency (CRA), is the governing body responsible for overlooking the collection of taxes in Canada. Owing money is never fun, especially when you owe the government. In fact, the CRA is known for their strict tax debt collection requirements. Interest rates and fees often apply when you’re late to pay the CRA. These additional costs on top of a tax bill can be hefty; hefty enough that you may need a tax loan to cover the total cost of your debts.
Technically, a tax loan is just like any other type of personal loan. The purpose is to gain access to the money needed to repay the government at an affordable rate.
For consumers with good credit, finding an affordable unsecured personal loan shouldn’t be too difficult, your local bank will likely have an option for you. Your main goal should be to find a lender who you trust and like working with. Once you apply and get approved you’ll be transferred the money and then can use it to pay back the CRA.
For individuals with poor credit or who have struggled financially in the past, it can be more difficult to find an affordable loan. Because affordability is important when it comes to finding a loan to pay off your taxes, you may need to provide collateral or get someone to co-sign your loan.
Before you apply for a tax loan in Canada, it’s essential that you know where your credit stands. This will allow you to understand what kind of lenders and loans you can qualify for. Similarly, if you have bad credit, you can try to improve it before applying for the tax loan. Thankfully, there are many platforms you can check your credit score for free in Canada, including Compare Hub.
Generally speaking, you have three main options when it comes to applying for a personal loan:
Depending on your financial situation, any of the following lenders may be a good option for you to consider.
Remember, finding the right loan involves consideration and understanding of your current financial situation and future goals. Whatever financial product you pick and whichever lender you proceed with should align with your budget and goals.
Check out this guide on how to apply for a loan in Canada.
As with all personal finance decisions, the right choice depends entirely on your unique situation. To determine if using a personal loan to pay off your tax debt is right for you, consider the pros and cons below.
Sometimes a tax loan is not an option due to inability to get approved, poor credit or simply because a loan is not the right option. Fortunately, there are other solutions to handling your tax debt as described below.
Does being in debt to the CRA affect your credit score? Find out here.
In Canada, the deadline to file your personal tax return and pay your taxes is April 30th of every year. If you fail to meet this deadline, the following penalties will apply to you:
As you can see, these penalties are quite harsh. In extremely rare cases, these penalties can be waived. Usually, the CRA will only waive penalties if the return was filed late for reasons beyond your control. If this applies to you, you will need to complete and submit a Request for Taxpayer Relief (RC4288). Note that the completion and submission of this form does not automatically waive the fees, the CRA must consider your case and approve your request.
Using a personal loan to cover the cost of taxes is a feasible option for many. The CRA is one of the most notorious creditors out there, it’s best not to get on their bad side by paying your taxes on time and in full. If using a tax loan sounds right for you, Loans Canada can help you obtain the financing you need today.
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