At some point you'll probably need to borrow money: for school, a car, a phone, or an emergency. Borrowing isn't good or bad on its own. What matters is what it costs, and the costs vary enormously depending on where you borrow.
The cost of borrowing
When you borrow, you usually pay back more than you borrowed. The extra is interest, and sometimes fees. To compare different kinds of borrowing, look at the yearly rate, often called the APR, and the total you'll pay back.
A quick tour of ways to borrow
Student loans. In Ontario, the Ontario Student Assistance Program (OSAP) combines grants, which you don't repay, with loans, which you do. Under the current rules, the federal part of the loan doesn't charge interest, while the Ontario part does. Repayment usually begins six months after you finish school. The OSAP website has the latest terms.
Lines of credit and personal loans from a bank or credit union usually charge much less than a credit card, but you need decent credit and income to qualify.
Phone and electronics financing is often advertised at 0%, but it may be tied to a long phone plan, and missing payments can cost you.
Buy now, pay later (BNPL) splits a purchase into a few payments, often four. If you make every payment on time, there's usually no interest. But late payments can bring fees, and because it feels small, it's easy to stack several at once and lose track.
Payday loans give you cash quickly until your next paycheque, with no credit check. They're also one of the most expensive ways to borrow. A typical payday loan charges around $14 to $15 for every $100 borrowed for two weeks, which works out to roughly 390% a year.
A worked example
Say you need $500 and it takes you two months to pay it back. Here's roughly what different options cost, as estimates:
| How you borrow | Approximate cost |
|---|---|
| Line of credit at 9.5% | about $8 |
| Credit card at 20.99% | about $17 |
| Buy now, pay later, all payments on time | $0 |
| Payday loan at $15 per $100, taken out four times in a row | about $300 |
The payday loan costs more than half of what you borrowed, because the fee applies again every two weeks you need the money. That's how people get stuck in a cycle of borrowing again to pay off the last loan.
Try it
What does borrowing cost?
Pick how much you need and how long until you can pay it back.
- Line of credit at 9.5%$8
- Credit card at 20.99%$17
- Buy now, pay later, all on time$0
- Payday loans at $15 per $100, 4 in a row$300
Questions to ask before you borrow
What's the total I'll pay back, including fees? What happens if I'm late? Can I pay it off early without a penalty? And the big one: do I need this now, or could I save up for it?
None of these options is off-limits, but knowing the cost up front means the choice is yours, not the lender's.
If you're already in a tight spot
If debt starts to feel unmanageable, you're not the only one, and there's help. Talking to your bank, or to a non-profit credit counselling service, can lay out options before things get worse.
Where to go next
Rent is usually the biggest bill for anyone moving out for the first time. The next lesson covers what renting costs, and the road from renting to owning.
Worked figures are estimates based on the example inputs shown, checked October 11, 2026. Rates, rules and lender policies change, and your own numbers will differ. This is educational information, not financial advice.