What is an Apprenticeship Loan?
The Canada Apprenticeship Loan (CAL) is a financial aid program administered by the Government of Canada to help qualified individuals pay for apprenticeship training in a designated Red Seal trade.
Red Seal trades operate under provincial and territorial regulations that set and oversee administrative and training standards for each.
Some examples include bricklayers, carpenters, gasfitters, industrial mechanics, electricians, plumbers, and welders.
You can find a complete list of trades here.
Under the CAL program, you can receive a maximum of $4,000 in interest-free loans per period of training for up to five periods.
You can use the funds to cover the cost of tuition, tools, living expenses, and more.
The loan repayment period starts once you complete your training or leave the program, at which point interest begins to accrue, as well.
Canada Apprentice Loan Eligibility
To successfully apply for the CAL, you must satisfy the following eligibility criteria:
- Be a Canadian citizen, permanent resident, or protected person.
- Be registered in a recognized Red Seal Trade Apprenticeship Program
- Be registered to undertake block release technical training with an approved provider
- Successfully pass a credit check (only applicable if it’s your first time applying for the program)
The CAL is not available for high school students, apprentices registered in Quebec, and those receiving Canada Student Loans.
Those who’ve been rejected from participating in the program, already received funds for five training periods, or been exempt from paying interest on their CAL loans for six years are also ineligible.
How to Apply for an Apprentice Loan
Assuming you meet the eligibility criteria, follow these steps to apply for a CAL:
Step 1: Create CAL Account
Create a CAL account online at the Canada Apprentice Loan Service Centre (CALSC).
Step 2: Complete Application Online
Complete your application online by filling out the requested information, attaching any required supporting
documentation, and agreeing to the terms and conditions of the CAL program.
Be sure to include your banking details to receive your funds sooner.
Step 3: Submit Application
Submit your application.
You can log in to your account to view the status of your application and any important updates sent to you by the CALSC.
The earliest you can apply for the CAL program is three months before your official training period commences.
The latest date you can apply is during your final day of training.
What is the Interest Rate on Canada Apprentice Loans?
By default, a CAL charges a variable interest rate.
This means that the interest rate you’ll pay will fluctuate based on changes in the prime rate.
You have the option to select a fixed interest rate, meaning your rate will never change for the duration of your repayment period.
This arrangement is ideal if you prefer a stable and predictable payment schedule.
Should you opt for a fixed-rate type loan, your assigned rate will equal the prime rate plus 2%.
Also, you’ll be unable to revert to a variable rate once you choose the fixed-rate option.
How to Repay Your Apprentice Loan
One of the advantages of a CAL is that you’re not required to repay it so long as you’re undergoing training in your chosen trades program.
However, as with any regular loan, you must eventually repay the borrowed funds.
The CAL repayment period is triggered when:
- You have completed your apprenticeship program
- You’re no longer registered in your apprentice program
- Your status as an interest-free applicant has expired (6 years maximum)
- Your application has not been confirmed by the last day of your training period
Your official repayment period starts six months after you graduate from your apprenticeship program.
Once your six-month grace period ends, you must make monthly payments to pay off your CAL balance.
A few weeks before your grace-period end date, you should receive details about your loans.
These will include the amount you owe, your interest rate, monthly payment amount, repayment start date, and how long it will take to pay off your loan in full.
If you so choose, you can begin making payments immediately upon completing your training program.
You can contribute your monthly payments by several payment methods: online, pre-authorized debit, telephone banking, etc.
Suppose you’re experiencing financial hardship during your repayment period.
In that case, you can contact the Repayment Assistance Plan (RAP) to negotiate an alternative monthly payment.
Depending on your circumstances, you can also enroll in the Repayment Assistance Plan for Borrowers with a Permanent Disability (RAP-PD) or Severe Permanent Disability Benefit.
The Revision of Terms request also allows you to decrease your increase your monthly payment amount.
You also can alter your payment frequency and payment due date under this option.
It’s best to seek financial help as soon as possible as missing payments adversely affect your credit score.
An impaired credit score will make it harder for you to qualify for various credit products in the future.
One final thing to remember regarding repayments: you’re entitled to a 15% tax credit on the interest portion of your CAL repayments, which you can use to reduce your tax burden.
You’ll receive a document showing proof of your interest payments that you can submit when you file your taxes.
Frequently Asked Questions
- Are apprentice loans interest-free?
- Canada Apprentice Loans are interest-free while you’re participating in your apprenticeship training program. However, interest begins accruing the day after your apprenticeship end date. Though you’re entitled to a six-month grace period, you can start making payments right away so that fewer interest charges accumulate on your loans.
- Are apprentices eligible for tool allowances?
- Yes. Tradespeople can deduct on their tax return a percentage of the cost of the tools and equipment they purchase for their employment.
The maximum deduction allowed is $500. To qualify for the deduction, your employer must verify that:
- The tools were required as a condition for your employment
- The tools were used exclusively for employment-related purposes
- The tools can’t be electronic communication devices, like a smartphone
Your employer must fill out the necessary details on form T2200.
If you work as an eligible apprentice mechanic, you can claim a further deduction.