When it comes to financing options in Canada, unsecured loans are arguably the most popular, and for good reason. Unsecured loans require no collateral, which means you aren’t risking a valuable asset. On the other hand, credit score requirements and other eligibility criteria can be stricter.
Whether you need to consolidate debt or pay for an unexpected expense, an unsecured loan is a versatile option.
Key Points
- An unsecured loan is a type of financing that does not require collateral.
- Typical forms of unsecured loans include credit cards, personal loans, and lines of credit.
- These loans are available from banks, credit unions, and private lenders.
What Is An Unsecured Loan?
An unsecured loan generally refers to a personal loan that has no collateral. Collateral, also known as security, is anything of significant value that can be used by the lender to cover the owed amount in the event that the borrower defaults.
With an unsecured personal loan, you’ll obtain a lump sum amount upfront. After the funds are received, the borrower must make regular, scheduled payments, plus interest, to repay the borrowed amount.
Do note that unsecured loans are generally more expensive than secured loans because the lender is taking on more risk by not taking any collateral.
Borrow Up To $50,000
Where Can You Get An Unsecured Personal Loan?
An unsecured loan can be obtained from various sources in Canada, including the following:
| Banks | Banks tend to offer the lowest rates, favourable terms, and higher loan amounts compared to other lenders. However, you’ll typically need good credit to qualify. |
| Credit Unions | Credit unions are member-owned nonprofits that offer unsecured loans with competitive rates and flexible terms. |
| Private Lenders | These lenders generally operate online and offer fast loan approval and funding, and typically accept bad credit. However, their interest rates tend to be higher. |
Best Unsecured Personal Loans In Canada
Filters
- Amount
- Up to $35,000
- Rate
- 9.99% – 34.95%
- Term
- 6 – 84 Months
- Amount
- Up to $60,000†
- Rate
- 19.99% – 34.99%*
- Term
- 6 – 120 months
- Amount
- $500 – $10,000
- Rate
- Up to 34.99%
- Term
- Up to 60 months
Can You Qualify For An Unsecured Loan?
While it is challenging to qualify for an unsecured loan, it can be easier to prepare if you know what’s expected of you:
- Credit Score: To qualify for an unsecured loan, a credit score of 660 or higher is often required, which is considered ‘good’ credit. If your credit score is below this level, do your best to boost it before you apply to better your odds of approval. Otherwise, consider applying with an alternative lender.
- Source Of Income: Credit is important, but lenders will also want to know that you have cash flow available to make payments. Often, this means regular and steady income.
- Debt-to-Income (DTI): How much debt you currently have in comparison to your income can have a big impact on how much you’re approved for. Generally, lenders want to see a DTI ratio of 32% or lower.
What If You Have Bad Credit?
Lenders often consider your credit score in their approval processes, especially banks. If you have bad credit, the goal is to find a lender who is willing to work with your circumstances, such as a credit union or private lender.
These lenders generally don’t put as much emphasis on your credit scores as banks, making it easier to qualify with bad credit. That said, do keep in mind that they’ll likely charge higher interest to account for the additional risk they are taking on.
Learn more: Personal Loan Eligibility Requirements For Bad Credit Lenders
| Can’t Qualify For An Unsecured Loan? Try A Secured Loan Instead If you’re unable to qualify for an unsecured loan, you can resort to a secured loan. If you put up collateral or a cosigner, you’re more likely to get approved, and you’ll likely get a lower interest rate. |
Learn How To Qualify For Other Loan Amounts
Other Types Of Unsecured Loans
Unsecured loans come in different shapes and sizes. Each form has a unique feature, purpose, and functionality. Here are some popular forms of unsecured loans:
Line Of Credit
A type of revolving credit that allows the borrower to withdraw cash as needed. Interest is charged until the balance is completely paid off.
A revolving loan is a flexible form of financing that allows you to access money up to a specified limit. You only pay interest on the amount used and can make payments to regain access to your full limit. A line of credit is the most common example of this type of financing.
Fast, Unsecured, Zero-Interest Lines Of Credit
| Nyble | Nyble offers an interest-free line of credit of up to $250 that can be used to build or improve your credit score. |
| Money Up | MoneyUp‘s FastForward product is an instant, interest-free line of credit of up to $1,000 that gives users early access to their next paycheque, with no credit check required. Users pay a small fee and can receive funds within minutes. |
Learn more: Best Line Of Credit Rates In Canada 2025
Payday Loans
A payday loan is a short-term, unsecured loan of up to $1,500 that’s typically repaid in one lump rather than in installments. These loans come with very high interest with loans terms ranging from 14 to 62 days.
Payday loans are very easy to qualify for: all you need is a steady income and an active bank account. Since no credit check is required, they’re often used by those with poor or limited credit history. However, despite their convenience, payday loans are one of the most expensive borrowing options available and can be difficult to repay within such a short time frame.
Because of the financial risk and potential for debt cycles, payday loans should be considered only as a last resort.
Credit Card
A credit card is a financial tool that allows you to borrow money from a creditor to make purchases, up to a set credit limit. You can put as much or as little on credit as you like, as long as you do not exceed your limit. If you pay off the balance in full each month, you can continue to spend on credit without incurring interest. However, if you carry a balance forward, interest is charged on that balance.
Credit cards often come with rewards, such as cash back or travel points, and can help build your credit history when used responsibly. However, missed payments or high balances can lead to debt and negatively impact your credit score.
Cash Advance
A cash advance is a short-term loan that provides immediate access to cash. It’s designed to help cover urgent expenses or bridge gaps in income, often without a credit check.
Instant, Zero-Interest Cash Advances
| Bree | Bree offers an interest-free cash advances of up to $500 to help users avoid overdraft fees and cover short-term expenses. There’s no credit check required, so bad credit is accepted. Standard funding is free, though users can opt for instant transfers for a small fee. |
| KOHO Cover | KOHO Cover is an interest-free cash advance to help Canadians avoid overdraft fees and cover unexpected expenses. For a small monthly fee, users also get access to their free credit report and financial coaching. |
How To Apply For An Unsecured Loan
To apply for an unsecured loan, follow these steps:
Step 1: Compare Lenders
Depending on your current financial and credit profile, you’ll want to apply with lenders whose minimum requirements you meet. You can do this by applying for a loan quote or pre-approval to compare loan offers. You can also use a comparison platform like Loans Canada to compare multiple offers.
| Do You Know Your Credit Score? Check it for free using Loans Canada’s CompareHub. |
Step 2: Choose Loan Offer And Apply
Depending on the lender you’re applying with, you can submit your application online or in person (If available). Make sure all fields are completed and all information is accurate.
You may need to provide the following documentss:
- Photo ID (driver’s license, passport)
- Proof of residency (utility bill, lease agreement)
- Proof of income (pay stubs, bank statements)
- Proof of employment (employment letter)
Note: Many lenders use instant bank verification to securely assess your financial info without any documents and speed up approval.
Step 3: Review And Accept The Offer
If you’re approved, you’ll receive a loan agreement. Read the fine print and make sure you understand all terms, including prepayment penalties, late fees, and the interest rate. Then, you can sign the agreement.
You’ll receive your funds via direct deposit or e-transfer.
Why Choose An Unsecured Loan?
Unsecured loans can be attractive financing options for the following reasons:
- No Valuable Assets Required: You don’t need an asset of value to get an unsecured loan. That means your personal assets are safe, even if you default.
- Easy Application Process: Your application can be completed online and is much simpler than traditional lending institution application processes. You will also find out if you were approved or within a day.
- Flexible Use Of Funds: The money you get from an unsecured loan can be used for just about any purpose, including debt consolidation, emergencies, travel, and others.
Before Applying, Consider These Risks
Before considering an unsecured loan, be wary of the following potential drawbacks:
- Small Loan Amounts: Compared to secured financing, lenders tend to lend smaller amounts. This is to decrease the risk of the borrower defaulting.
- Higher Interest: Lenders charge more interest on unsecured financing to account for the additional risk. This means your monthly payments and the overall cost of borrowing will be higher.
- Difficult Qualifying: A key requirement for unsecured financing is good credit. If you don’t have a good credit score, you might not qualify.
Unsecured vs. Secured Loan: A Comparison
The following chart compares the key elements of unsecured versus secured loans:
| Secured Loans | Unsecured Loans | |
| Collateral Required? | Yes | No |
| Risk To Borrower | Asset may be seized if loan is not repaid | Credit score may suffer |
| Interest Rates | Typically lower | Typically higher |
| Loan Amounts | Generally higher | Generally lower |
| Approval Requirements | May be easier with collateral, even with bad credit | Requires good credit |
| Repayment Terms | Longer terms | Often shorter terms |
| Loan Types | -Mortgages-Car loans-Home equity loans | -Personal loans-Credit cards-Lines of credit |
Learn more: Unsecured vs. Secured Loan: What’s The Difference?
Final Thoughts
Unsecured loans can be a great financial product because of their versatility and flexibility. Before making the decision to move forward with unsecured financing, take the time to assess your finances and goals, and find the right lender who can offer you what you need and can qualify for.
FAQs
How much can I borrow with an unsecured loan?
What’s better, a secured loan or an unsecured loan?
What if I miss a payment on my unsecured loan?
®Fairstone Financial Inc. is a wholly owned subsidiary of Fairstone Bank of Canada.
*Interest rates are subject to change. Actual Annual Percentage Rate (APR) varies based on the province of residence and individual factors like credit details and loan amount. The interest rate on an unsecured personal loan is 31.99% in BC.
†On approved credit. Terms and conditions apply. Interest rates vary by province/territory and from customer to customer based on factors like credit score and borrowing history. See Fairstone’s website for details.
Fairstone Financial Inc. holds high-cost credit licenses in AB, MB (License #85047, expiring 20-02-2026) and QC; it has applied for a high-cost credit grantor license in NL. For license information by province, visit Fairstone.ca/HCCG
In Ontario, Fairstone Financial Inc. is licensed as mortgage brokerage 10821.
In Nova Scotia, Fairstone Financial Inc. is licensed as mortgage lender #2021-3000028.
