Installment Loan Interest Rates in Ontario: What's the Legal Maximum?

If you're comparing installment loans in Ontario, 35% is the number to know. Since January 1, 2025, Canada's Criminal Code has defined the criminal rate of interest as an annual percentage rate, or APR, that exceeds 35% of the credit advanced.

For most personal installment loans, that makes 35% APR the practical legal ceiling.

Magical Credit's current installment loan rate is 34.86% APR. It is an annual rate, not a monthly one.

There is a little more to the rule than that, though. The law does not look only at the percentage printed beside the word "interest," and not every type of credit is treated in exactly the same way. Payday loans, for example, operate under a separate set of rules.

For someone considering an ordinary installment loan, the useful starting point is simpler: understand the APR, look at the full repayment obligation, and don't mistake "below the legal maximum" for "cheap."

What changed with Canada's interest rate limit?

Canada lowered its criminal interest rate on January 1, 2025.

Before the change, the federal limit was based on a 60% effective annual rate, roughly equivalent to 48% APR. The current Criminal Code uses a clearer APR standard and sets the criminal rate at anything that exceeds 35% APR, subject to limited exemptions.

This matters when researching loans online because a surprising amount of older Canadian lending information is still around. An article from 2022 or 2023 may quote a completely different maximum and have been accurate when it was published.

It isn't the rule that applies to a new installment loan today.

The current definition is federal, which also answers another common question: Ontario did not independently decide to set a 35% criminal interest rate. Section 347 of the Criminal Code applies across Canada. Ontario has its own consumer protection and disclosure rules, but the 35% threshold itself comes from federal law.

So is the maximum 35%, or anything below 35%?

The wording is worth getting right.

The Criminal Code says that a criminal rate is an APR that exceeds 35% on the credit advance.

In everyday terms, lenders and borrowers will usually refer to 35% as the maximum or the ceiling. That is sensible shorthand. Technically, though, the statute does not say that 35.00% itself "exceeds 35%."

That distinction may look minor, but it is better than repeating the common online claim that "35% or more is automatically illegal." That isn't how the definition is written.

For a typical consumer comparing personal installment loans, there is no practical reason to aim for a rate near the ceiling just because the law permits it. The limit is there to draw a legal boundary. It is not a recommended borrowing rate.

What does APR actually tell you?

APR stands for annual percentage rate. It puts the borrowing rate onto an annual basis so different credit products can be compared more consistently.

That sounds obvious, but it matters because lenders have historically described high-cost credit in ways that made comparison harder. A monthly percentage can look modest until it is translated into an annual rate.

Magical Credit now uses 34.86% APR for its installment loan product. That is the figure that should be used when describing the rate. Older Magical Credit pages may still contain references to monthly interest, but those references no longer reflect the current product information.

APR is useful because it gives you a common measure. It still does not tell you, on its own, how comfortable the loan will be to repay.

A $2,000 loan and a $10,000 loan at the same APR create very different obligations. So can two loans with different repayment periods.

The rate is one part of the decision, not the whole decision.

Does the 35% rule only apply to "interest"?

Not in the narrow sense most people use the word.

For the purposes of section 347, the Criminal Code defines interest broadly. Depending on the charge and how it relates to advancing the credit, the calculation can include certain fees, commissions, penalties and other expenses rather than looking only at the lender's stated interest rate.

There are also amounts the legislation specifically excludes.

This is important because otherwise the law would be easy to get around. A lender could advertise a lower interest rate and simply shift part of the cost into compulsory charges under another name.

The Criminal Code is designed to look more broadly at what the borrower is paying for the credit.

From a borrower's point of view, that leads to a useful rule of thumb: don't judge a loan from the headline rate alone. Read the actual cost-of-borrowing disclosure and the agreement.

If you're being asked to pay a charge you don't understand, ask what it is for and whether it is required.

Magical Credit's current rate is 34.86% APR

Magical Credit currently offers secured installment loans to eligible Ontario residents at 34.86% APR.

Loan amounts currently range from $1,500 to $20,000, subject to approval, and repayment can be arranged over 12 to 78 payments. Depending on the agreement, payments may be weekly, bi-weekly, semi-monthly or monthly.

Magical Credit is currently accepting applicants with employment income and is currently lending in Ontario for this installment loan product.

It is also important to note that the loans are now secured.

Those details matter because some older Magical Credit pages still describe a different product. If you're looking at the current offer, use the current disclosure and agreement rather than relying on an old FAQ, cached page or article.

The 34.86% figure is deliberately close to the federal threshold, but still below it.

That tells you the rate is within the current criminal interest framework for an ordinary consumer installment loan. It does not tell you whether the loan is the lowest-cost option available to you.

Is 34.86% APR expensive?

Yes. Compared with many mainstream bank loans, credit union products or lower-rate credit available to borrowers with stronger credit profiles, 34.86% APR is a high borrowing rate.

There is no benefit in pretending otherwise.

Alternative lenders generally serve customers who may not qualify easily for conventional credit. That can include borrowers with damaged credit histories or previous financial difficulties. The lending decision and pricing reflect a different level of risk.

Still, if you have access to a substantially lower-cost option, compare it before taking a loan at 34.86% APR.

The fact that a lender can legally charge a particular rate does not make that rate inexpensive.

It also doesn't mean the loan is automatically a bad choice. Sometimes a borrower has a defined expense, cannot reasonably delay it and has enough employment income to manage the scheduled repayments. What matters is whether the numbers work in that person's actual budget.

That's a much better test than asking whether the APR is simply legal.

Why the repayment term matters

Borrowers often focus on the size of each payment because that's the amount that has to come out of the bank account every week, every two weeks or every month.

That makes sense, but it can hide another part of the cost.

Suppose you're offered two repayment schedules for the same amount. The longer one may give you a smaller payment. That's useful if the shorter payment would strain your budget. But it also leaves the debt outstanding for longer.

A shorter schedule usually means larger installments and a faster finish.

Neither is automatically better. What you don't want is to choose a long term simply because the payment looks nicer on the screen without checking the full repayment obligation.

Before accepting the loan, look at the numbers together:

That gives you a much better picture than APR alone.

Can an Ontario installment lender charge 36% APR?

For an ordinary consumer installment loan covered by section 347, a 36% APR would be above the 35% criminal rate threshold.

That should be a serious warning sign.

The qualification "ordinary consumer installment loan" is important because Canadian law does contain specific exemptions for some types of credit. A blanket statement that absolutely no loan can ever exceed 35% APR would therefore be wrong.

For the kind of personal installment loan discussed here, however, 35% is the relevant ceiling.

What about payday loans? Their APR can be far higher

This is where comparisons often become confusing.

A qualifying payday loan can show an annualized percentage rate much higher than 35% without necessarily falling foul of the same criminal interest rule. Payday loans can qualify for a specific exemption where the legal conditions are met.

They are also subject to a separate cost limit.

Since January 1, 2025, the federal payday loan regulations cap the cost at $14 per $100 borrowed for qualifying payday loans.

Because payday loans are very short-term products, turning a short borrowing fee into an annual percentage creates a very high APR.

That doesn't mean payday loans and installment loans should be compared as though they are the same product with different interest rates.

An installment loan is generally repaid over a series of scheduled payments. A payday loan is short-term borrowing with a very different repayment structure.

The legal treatment is different too.

For this reason, seeing a payday loan with an annualized APR above 35% does not prove that the lender is breaking the criminal interest law.

Does bad credit change the legal maximum?

No.

A lender does not get a separate interest ceiling because a customer has poor credit.

Credit history can influence whether an application is approved. It can influence the amount a lender is comfortable advancing and, depending on the lender and product, the terms offered.

What it does not do is remove the criminal interest framework.

This is particularly important for borrowers who have been turned down elsewhere. Having fewer borrowing options can make it tempting to accept whatever rate is offered.

Before doing that, check the APR carefully and make sure you understand the repayment schedule.

"Approved" and "affordable" are two different things.

A lower payment doesn't necessarily mean a better loan

This is probably the easiest mistake to make when comparing installment loans.

Imagine that one offer has a payment you can comfortably manage and another has a noticeably larger payment. The first looks better straight away.

But what if the smaller payment continues for much longer?

Now the comparison is less obvious.

Likewise, a loan with a lower APR can still involve a considerable total repayment if the amount borrowed is much larger or the repayment period is long.

There is no single number that tells you whether a loan is right for you.

APR tells you the annualized borrowing rate. Your payment schedule tells you what has to come out of your cash flow. The total repayment tells you the overall commitment.

Look at all three.

What should you check before you sign?

By the time a borrower receives an offer, the temptation is often to jump straight to the amount being deposited.

That is the point to slow down.

You should be able to find the APR without hunting for it. You should know exactly how much each payment is, how often it comes out and how many payments there will be.

Because Magical Credit's current installment loans are secured, you should also know what the security is and what the agreement says happens if the loan goes into default.

Check for optional products as well. "Optional" should actually mean optional. If something changes the amount you repay, understand what it is before agreeing to it.

And finally, ask yourself a question that has nothing to do with the law:

Can I make this payment from my normal employment income after rent or mortgage costs, utilities, groceries, transportation and my existing debts have been covered?

A lender staying under 35% does not answer that question for you.

How to compare two installment loan offers

You don't need a complicated spreadsheet.

Put the agreements next to each other and compare the figures that actually affect you.

Start with the amount you'll receive. Then look at the APR, payment, number of payments and total repayment.

If one loan is secured, check what that means in the agreement.

Look for required charges. Ignore sales language for a moment and compare the actual obligations.

If Loan A has a lower payment but keeps you in debt much longer, decide whether that trade-off is worthwhile. If Loan B has a lower APR but you're borrowing significantly more money, don't assume it is cheaper simply because the percentage is lower.

And if one lender's agreement is difficult to understand, that's worth paying attention to as well.

A consumer credit agreement should not require guesswork about what you owe.

Frequently Asked Questions

What is the maximum legal interest rate on an installment loan in Ontario?

For an ordinary consumer installment loan subject to section 347 of the Criminal Code, 35% APR is the practical legal ceiling. More precisely, the Criminal Code defines a criminal rate as an APR that exceeds 35% of the credit advanced.

When did the 35% limit start?

The current limit came into force on January 1, 2025. Older Canadian articles may refer to the previous criminal interest threshold.

Is 35% APR illegal?

The law says the criminal rate is an APR that exceeds 35%. That is why 35% is generally described as the ceiling rather than saying that every rate equal to 35% is automatically criminal.

What APR does Magical Credit charge?

Magical Credit's current installment loan APR is 34.86%.

Is 34.86% a monthly interest rate?

No. 34.86% is an annual percentage rate. Older Magical Credit material referring to monthly rates no longer reflects the current installment loan product.

Does the 35% rule include fees?

The Criminal Code uses a broad definition of interest that can include certain fees, commissions, penalties and other costs connected with advancing the credit. It also sets out specific exclusions. That is why the legal calculation cannot always be reduced to the lender's stated interest percentage alone.

Why can payday loan APRs exceed 35%?

Qualifying payday loans can fall under a specific exemption from the criminal interest provisions and are subject to their own regulatory cost limits. Since January 1, 2025, the federal cost cap for qualifying payday loans is $14 per $100 borrowed.

Can a lender charge more because I have bad credit?

A lender may take your credit history into account when deciding whether to lend, but bad credit does not create a general exemption from the criminal interest rate rules.

Is a loan at 34.86% APR a good deal?

That depends on what other credit you can qualify for and whether the repayment fits your budget. 34.86% is a high borrowing rate compared with many mainstream lending products. If a lower-cost option is available to you, compare it before borrowing.

Are Magical Credit installment loans available outside Ontario?

Magical Credit is currently offering its installment loan product to eligible Ontario residents.

What income does Magical Credit currently accept?

Magical Credit currently requires employment income for its installment loan product.

Are Magical Credit installment loans secured?

Yes. Magical Credit's current installment loans are secured, so applicants should read the security provisions in their individual loan agreement carefully.

What matters most

For a new personal installment loan in Ontario, 35% APR is the legal figure to keep in mind. Canada's Criminal Code defines the criminal rate as anything that exceeds that level, subject to specific exceptions.

Magical Credit's current rate is 34.86% APR.

But the difference between 34.86% and 35% is not the most important calculation a borrower will make.

The useful question is what the loan will cost in your own circumstances. Check the amount borrowed, the repayment schedule, how long the debt will last and what remains in your budget after each payment.

The law sets the boundary for lenders.

Your budget sets the boundary for you.