If I Pay Extra On My Car Loan Does It Go To Principal?
Find out if your extra car loan payments will go straight to your principal and how these payments will affect your car loan.
For some Canadians, filing a tax return is not a problem. In fact, they may gleefully look forward to the April 30th tax deadline, as they expect a hefty refund. For others, however, April 30th is a dreaded date. That’s because instead of being the recipient of a tax refund, they discover that they owe money to the CRA.
While the impact of an extra tax bill may be negligible for some taxpayers, it can be a great burden for those who are struggling financially and have limited funds. The added weight of another bill may be more than they can handle – and the prospect of being indebted to the CRA can be distressing. Maybe you find yourself in such a predicament?
Luckily, there’s no need to worry, as you have many options available to deal with your tax debt.
Find out what’s the maximum tax refund you can get in Canada.
The penalty for filing a tax return late is 5% of the balance owing, plus 1% for every month the balance is outstanding, up to a maximum of 12 months. Interest accrues daily on the owed balance at the CRA’s prescribed rate, which changes every quarter.
Even if you’re unable to pay your taxes by the deadline, you should at least file your current year’s return and previous years’ returns if you haven’t done so already. You can’t fully explore your options until you know exactly how much you owe – and the CRA will refuse to work with you to find a solution until your filings are up to date.
![]() File your taxes with TurboTaxGet Started |
If sending a lump-sum payment to settle your tax liability is not possible, there are other options you can explore, which are detailed below.
If you’re in a dire situation financially, you can make a formal request to the CRA to have your interest charges and late-filing penalties waived. You can also ask the CRA to accept a late-filed tax return or request a tax reassessment to claim refunds beyond the allowable 3-year period (under ordinary circumstances, the CRA disallows taxpayers from claiming a refund on a return filed three years after its due date).
Check out if you should file your taxes if you have no income.
To be eligible for these tax relief provisions, you must prove that you’re unable to fulfill your payment obligations due to:
You can apply to have your case considered by completing form RC4288 – Request for Taxpayer Relief and submitting it to your local tax office. Be sure to provide as many details as possible and include all the necessary documentation. The time limit to file your application is ten years from the tax year in which you’re asking for leniency.
Check out these 17 ways you can reduce your tax debt.
The CRA offers support and guidance for taxpayers who are dealing with tax payment issues. The agency understands that taxpayers routinely experience challenges with their finances and, as a result, offers flexible payment plans.
You can contact the CRA to work out a payment arrangement that works for you. To initiate a payment arrangement, follow these steps:
Check out if you have any unclaimed cheques with the CRA.
Sometimes the only way to pay off your tax debt is to borrow money. If you’re unable to negotiate a payment plan with the CRA, obtaining a personal loan is a great alternative.
Interest rates on personal loans are typically lower than those on credit cards. And if you possess a high credit score, you’ll have an abundance of loan products to choose from. A loan allows you to extinguish your tax debt in one easy payment, freeing you from CRA collection letters and rapidly accumulating interest charges.
Each financial institution has its own eligibility requirements that dictate who can qualify for a loan and at which rate. Some of the criteria lenders assess when they review your loan application include your:
Suppose you rank high in many of these financial metrics. In that case, you’ll likely qualify for a loan with an affordable interest rate. Conversely, suppose your finances are in poor shape. In that case, lenders will be hesitant to extend credit to you, as they perceive you to be a high-risk borrower.
Should you fail to secure a personal loan from a traditional lender, such as a bank, you can seek financing from various alternative lenders. Alternative lenders specialize in lending to individuals with low credit scores and unstable incomes. However, any loan you qualify for will come with a higher interest rate.
The most efficient way to find a loan is to utilize an online loan comparison platform. By providing just a few details, you can access a wide range of lenders and select the loan most suitable for you.
Check out these tax loans in Canada.
If you own a home, consider using your property’s equity to pay off your tax debt. This strategy is advantageous when interest rates are low.
There are three ways to access your home equity:
Find out if you can consolidate your tax debt.
Using a credit card to pay off your tax debt is not optimal due to the high-interest rates. However, it’s preferable to having your wages garnished or liens placed on your assets, so it’s worth considering.
Examine what rate you’ll be paying on your current card. The typical credit card rate in Canada is 19.99%. Some cards charge rates higher than 30%. Interest charges can accumulate quickly, especially if you anticipate carrying a balance for many years. Your best bet is to apply for a low-interest credit card. Some cards also offer the ability to collect points or receive cashback, which is a nice bonus to look for as well.
The CRA doesn’t accept credit cards as a payment method; you must use a third-party service provider to process your payment, which will cost you a small fee.
Find out if owing money to the CRA affects your credit score.
What can you do if you’ve exhausted all options to secure the funds required to pay off your tax debt? If the situation escalates to this point, you can file a consumer proposal to negotiate a reduction in your tax debt with the CRA.
A growing and popular bankruptcy alternative, a consumer proposal is a legally binding debt settlement contract filed with a Licensed Insolvency Trustee. The trustee will administer the proposal on your behalf and help you determine what you should offer to pay the CRA and other creditors if needed. For the proposal to be valid, it must be accepted by more than half of your creditors, based on the total amount owing.
If you owe a significant amount of taxes to the CRA, there are various routes you can take to pay off the debt.
Assuming your tax filing is up to date, you should first explore the cheapest and least demanding options. These include arranging a fair and affordable payment plan with the CRA and asking for financial relief, resulting in you better managing the debt. Should those methods fail, you can try to secure a loan, use a credit card, or file a consumer proposal.
Rating of 5/5 based on 2 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.
Find out if your extra car loan payments will go straight to your principal and how these payments will affect your car loan.
Almost $500 in commission-free trades. Code “50TRADESFREE”. Conditions apply.
Earn an average 5%¹ cash back at thousands of partners and at least 1%² cashback guaranteed.
Build credit while spending money with the Refresh Financial VISA card.
With KOHO’s prepaid card you can build a better credit score for just $7/month.
Check out our interview with addy; a platform that allows Canadians to invest in different properties across Canada with as little as $1.
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. Nothing on this website constitutes professional and/or financial advice.