The Canada Revenue Agency charges 7% interest on overdue tax, compounded daily, and that rate has held steady for five straight quarters into the third quarter of 2026. Penalties sit on top of it. Nothing about the balance gets cheaper while you decide what to do.
Canadians clear a CRA balance with borrowed money in one of two ways: business financing underwritten against revenue, or home equity, usually a second mortgage or a refinance through a private lender. Banks rarely fund either once arrears are on file. Which path fits comes down to two questions: does the debt sit in your corporation or in your personal name, and has the CRA already registered a lien on title.
That second question decides who can fund the file at all. Most borrowers cannot answer it, and it is usually the first thing we check.
What the CRA charges while you decide
Start with the number you are actually up against. From July 1 to September 30, 2026, the Canada Revenue Agency charges 7% on overdue tax, Canada Pension Plan contributions and employment insurance premiums. The CRA sets that figure at the prescribed rate, currently 3%, plus four percentage points, and it compounds daily rather than monthly.
On a $60,000 balance, daily compounding at 7% adds roughly $4,350 over twelve months. Late-filing penalties are separate and land on top. If the arrears are unremitted GST/HST or payroll source deductions, the penalty structure is harsher again, because that money was never yours to hold.
Interest is not the part that ends the deal
Escalation is. The CRA does not need a court order to act, which puts it in a different category from every other creditor you deal with. A Requirement to Pay sent to your bank or your employer redirects funds before they reach you. A lien can be registered against real property. For a corporation with unremitted source deductions or HST, directors can be assessed personally for the full amount, which is how a business problem becomes a household problem.
A registered lien locks the property. You cannot sell, transfer or refinance around it, and A lenders reading the title search will stop there. Borrowers fixate on the interest rate. In practice the lien is the expensive part, because it removes your cheapest options from the table before you have finished reading the letter.
Two ways Canadians fund a tax payoff
There is no CRA loan product. What exists is ordinary financing, arranged quickly, with the proceeds directed at the balance. Two routes cover almost every file.
| Route | What it underwrites | Best fit | Watch for |
|---|---|---|---|
| Business term loan or line of credit | Revenue and deposit history | Corporate HST or payroll arrears, no real estate to pledge | Fixed payment has to fit real cash flow, not projections |
| Merchant cash advance | Card and deposit volume | Retail, restaurant or service businesses needing speed | Repayment moves with daily deposits, so slow months cost more in factor terms |
| Private second mortgage | Home equity, not credit score | Personal tax debt, or a lien already on title | Converts unsecured tax debt into debt secured by your home |
| Refinance with an alternative lender | Equity plus provable income | Larger balances where the existing mortgage is up for renewal anyway | Payout penalties on the current mortgage |
The business side
If the arrears are corporate, financing against the business is usually cleaner than touching your house. A term loan gives you a fixed schedule you can plan around. A line of credit suits arrears that built up from seasonality rather than a bad year. Alternative underwriting matters here, because a company with tax arrears will not pass a bank credit adjudication, but twelve months of steady deposits tells a different story than the balance sheet does. What lenders actually read is your bank statements, in detail.
The home equity side
For personal balances, a second mortgage is the common instrument. Most private lenders keep total borrowing under roughly 75% to 80% of appraised value, including your existing first mortgage, so the equity has to be there. The payout mechanics matter. Your lawyer pays the CRA directly out of the advance at closing, gets written confirmation the balance is cleared, and the lien comes off title, usually within a few weeks. You are then paying a lender instead of the CRA, with clear title and no garnishment risk. If the structure is unfamiliar, start with how a private mortgage works, then compare it against a credit line using the second mortgage versus HELOC breakdown.
Honestly, if you own property with real equity and the CRA has already raised a lien, spending three weeks waiting for a bank to decline you is the costliest move available. The interest keeps compounding through the whole application.
The 4-point tax arrears file
Every lender funding a tax payoff wants the same four things. Get them together before you apply and a file that would otherwise take two weeks can close in days.
1. A current statement of account
Not last year's Notice of Assessment. Pull a current balance from CRA My Business Account or My Account, showing principal, penalties and accrued interest separately. Lenders fund a number they can verify, and a stale figure means a second round of conditions.
2. Whether a lien is already registered
This single fact decides which lenders can even look at the file. Most people we talk to know their balance to the dollar and have no idea whether anything has been registered against title. A title search settles it in an afternoon. If a lien exists, the payout has to be structured through your lawyer, and that changes both the lender list and the timeline.
3. Filings up to date, not just payments
Unfiled returns are a bigger obstacle than unpaid ones. A lender cannot size a debt that has not been assessed yet, and the CRA can arbitrarily assess in the meantime. If you have missing years, your accountant needs to file them before financing makes sense.
4. Cash flow that services the new payment
The point of borrowing is to replace an obligation you cannot manage with one you can. That only works if the new payment fits. Bring twelve months of statements and be straight about the seasonal months. Our process page lays out what an advisor reviews.
The pattern behind most tax arrears we see is not overspending. Usually it is a business that never separated the HST it collected from its operating cash, so every quarter borrowed from the next. Financing buys time to fix that. It does not fix it for you.
When financing the payoff is the wrong call
Sometimes borrowing is the wrong answer, and a decent lender will say so.
The CRA will negotiate a payment arrangement directly, and for smaller balances you can genuinely clear over a reasonable period, that is often cheaper than any financing. Interest keeps running, but you pay no lender fees, no legal costs and no appraisal. If the arrears stem from circumstances outside your control, such as serious illness or a natural disaster, the taxpayer relief provisions can cancel or waive penalties and interest, though never the tax itself. Ask your accountant about that route before you borrow against your house. The Financial Consumer Agency of Canada publishes free tools for working out what a new payment does to your budget.
The real risk of a secured payoff
A second mortgage changes the character of the debt. Tax arrears are a serious obligation, but they are not registered against your home until the CRA acts. Once you refinance, the debt is secured against the property from day one, and a missed payment puts the house in play. That trade is worth making when it clears a lien, stops a garnishment, or protects a business that is otherwise sound. The trade goes badly when the underlying problem is a business that has not been profitable for two years, because you end up in the same position with less equity to work with.
Solid Capital is a Canadian alternative lender for business owners and homeowners the banks have declined or under-served. We read the full file, bank statements, revenue history and the actual reason the arrears built up, rather than stopping at a credit score. In many cases funding lands within 24 hours of approval. Start an application at solidcapital.ca: about five minutes, no impact to your credit to apply, and a Canadian advisor reviews every file personally.
The CRA does not negotiate its interest rate. Your financing is the one variable you control. Start there.
Frequently Asked Questions
Can you get a loan or mortgage to pay off CRA tax debt in Canada?
Yes. There is no dedicated CRA loan, but business financing and home equity financing are both routinely used to clear a tax balance. Banks generally decline these files once arrears are on record, so most of this lending is done by alternative and private lenders who underwrite revenue or equity rather than a clean tax history.
Will the CRA remove a lien once the debt is paid?
Yes, once the balance is paid in full the lien is discharged from title, typically within a few weeks. In a financed payoff your lawyer pays the CRA directly out of the mortgage advance at closing, then obtains confirmation the balance is cleared so the discharge can be registered.
Do banks approve refinances when you owe the CRA?
Rarely. Most banks and credit unions require tax arrears to be paid in full before they will fund a refinance, and a registered lien usually ends the application outright. Alternative and private lenders can still fund, and can structure the payout so the CRA is paid at closing.
Can a corporation borrow to pay unremitted HST or payroll source deductions?
Yes, and it is a common use of a term loan or line of credit. Move quickly on these balances: unremitted GST/HST and payroll source deductions carry director liability, which means the CRA can assess directors personally for the full amount.
How much home equity do you need to clear tax debt with a second mortgage?
Most private lenders keep total borrowing at roughly 75% to 80% of the appraised value of the property, including the existing first mortgage. On a $700,000 home with a $400,000 first mortgage, that leaves room in the range of $125,000 to $160,000, subject to the appraisal and the lender.
Is a CRA payment arrangement better than financing the balance?
It can be, particularly for smaller balances you can clear over a reasonable period, because there are no lender fees, legal costs or appraisal expenses. Financing tends to win when a lien is threatened or registered, when a garnishment would stop your business operating, or when the CRA rejects the schedule you can actually afford.
