There are countless loan types available to Canadians. From short-term loans to longer-term loans, there is an option for everyone and every budget. However, when it comes to financing a big-ticket item, most consumers like the option of a long-term personal loan, as the longer the term, the lower the monthly payment will be.
Let’s take a closer look at long-term loans in Canada and what you need to know to apply and get approved for one.
Key Points
- A long-term loan provides a lump sum of money that is repaid over an extended period.
- Long-term loans come with lower monthly payments than short-term loans, though the total interest paid is typically much higher.
- To qualify for a long-term loan, you’ll need to meet the lender’s income, credit score, and debt-to-income requirements.
What Is A Long-Term Loan?
A long-term loan comes with an extended repayment period that allows borrowers to spread out their loan payments over a much longer period of time. This gives borrowers a chance to keep monthly payments low and is most suitable for large loan amounts.
How Long Are The Loan Terms?
Depending on what type of loan you take out, loan terms can range anywhere from 5 to 35 years:
- Personal Loans: While most personal loan terms range between 6 – 60 months, long-term personal loans can go up to 10 years.
- Mortgages: Amortization periods on mortgages in Canada can be as long as 25 – 35 years, depending on the down payment, type of property, and whether you’re a first-time home buyer.
- Auto Loans: Generally, you’ll find car loan terms ranging between 1 – 8 years.
Where Can You Get Long-Term Personal Loans In Canada?
Filters
- Amount
- Up to $35,000
- Rate
- 9.99% – 34.95%
- Term
- 9 – 78 Months
- Amount
- Up to $60,000†
- Rate
- 19.99% – 34.99%*
- Term
- 6 – 120 months
- Amount
- Up to $10,000
- Rate
- Varies by product
- Term
- Varies by product
Can You Get Long-Term Loans In Canada With Bad Credit?
Yes, you can get a long-term loan even if your credit score is relatively low. However, you may have fewer options available, and the loan may not be as favourable:
- Traditional Lenders May Not Approve: Banks typically require good credit for loans. As such, you’ll have better luck applying with an alternative lender.
- Higher Interest Rate: A lower credit score increases the lender’s risk. To offset this risk, the lender will typically charge a higher interest rate, which makes the loan more expensive.
- Lower Loan Amount: Lenders may also mitigate the risk of your lower credit score by offering a smaller loan amount.
Can You Get A No Credit Check Long-Term Loan In Canada?
If you’re looking for a long-term loan that doesn’t require a credit check, you’ll have very limited options. That’s because almost all long-term loans are large loans.
A lender is taking on significantly more risk than they do when they provide smaller short-term loans. This heightened risk level means that a lender will want to do what they can to verify your creditworthiness, which includes credit checks. This is why you’ll have a difficult time finding a lender who can provide you with a long-term loan without a credit check.
Whether you apply with a bank or a private lender, both will likely require a credit check. That said, you can get no-credit-check short-term loans, as these are generally less risky for lenders.
Types Of Long-Term Loans In Canada
Whether long-term or short-term, loans are typically divided into two different categories: secured and unsecured.
Secured Long-Term Loans
Secured long-term loans are backed by some form of collateral, something that has value. The two most common forms of secured loans are mortgages and car loans. With these two types of loans, it’s the item that you’re purchasing that acts as collateral.
You can also take out a personal loan and secure it against something that you already own, like a vehicle you’ve paid off in full. If you ever default on your loan, your lender may seize your collateral in order to recoup some or all of their losses.
How Much Can You Borrow?
Collateral takes some of the financial risks off of the lender. As such, when a loan is secured, you may be more likely to receive a larger sum of money, depending on your credit score and financial profile.
Unsecured Long-Term Loans
An unsecured loan is the opposite of a secured loan in that it does not require any form of collateral. With an unsecured loan, you’re applying for a loan that is not secured by an asset. This means that your approval will be based solely on your financial standing and/or your ability to repay the loan.
Since the lender has no assets of value to recoup if you default on the loan, an unsecured loan is considered riskier. As such, the lender may charge you a higher interest and/or offer a smaller loan amount.
Long-Term Loans vs. Short-Term Loans
Long-term loans and short-term loans differ in key ways:
| Short-Term Loan | Long-Term Loan | |
| Loan Term | Typically less than 1 year | Over 1 year, up to 5 years or more |
| Loan Amount | Smaller amounts (as little as $50) | Larger loan amounts (up to $35,000 or more) |
| Monthly Payments | May be higher payments due to shorter term | Lower payments spread out over a longer period |
| Total Interest | Lower overall interest cost | Higher overall interest cost |
| Interest Rates | Often higher due to short repayment period | Often lower, especially for secured loans |
Cost Of A Short-Term Loan vs. A Long-Term Loan In Canada
Despite shorter-term loans having a higher interest rate compared to long-term loans, the amount of interest paid can be much less than what you pay for a long-term loan in Canada. To give you an idea of the difference in interest costs between the two, let’s illustrate using an example:
| Long-Term Loan | Short-Term Loan | |
| Loan Amount | $15,000 | $2,000 |
| Interest Rate | 7% | 15% |
| Term Length | 5 Years | 1 Year |
| Monthly Payment | $297.02 | $180.52 |
| Total Paid | $17,821.08 | $2,166.20 |
| Total Interest Paid | $2,821.08 | $166.20 |
As you can see, even with a significantly higher interest rate, the short-term loan comes with lower total interest paid over the life of the loan. You can use this online loan calculator to calculate your loan costs.
Benefits Of A Long-Term Loan
As with any type of financial product, depending on what your needs are, certain products will benefit you more than others. Here are some benefits of taking out a long-term loan:
- Smaller, More Affordable Payments – A longer term allows you to repay it over a longer period of time, so the payments will be smaller. This means you’ll have more of your income at your disposal on a monthly basis. This is important for those who value having more money available to them to cover both general costs and to make sure they have enough money set aside in case of an emergency.
- Larger Loan Amounts – Typically, long-term loans are also larger. So, if you’re looking for a big loan, it’ll generally have a long-term.
- More Options – A long-term loan provides you with more options to purchase the things you need. On top of that, it allows you to take advantage of things that you might not be able to take advantage of without a loan, for example, a house in the perfect location or a business opportunity.
Drawbacks Of A Long-Term Loan
There are a couple of notable downsides of a long-term loan to consider:
- Higher Overall Cost – When comparing two loans and the only difference is the term length, the longer-term loan will cost more. That’s because long term allow interest to accrue more than short-term loans.
- In Debt Longer – While you may benefit from lower monthly payments with a long term loan in Canada, it also means you’ll be in debt for a longer period of time.
How To Apply For A Long-Term Loan In Canada
To apply for a long-term loan, follow these steps:
Step 1: Assess Your Needs
Decide how much you want to borrow, ensuring you don’t apply for a loan that’s more than what you need.
Step 2: Check Your Credit Score
It’s helpful to know what your credit score is before applying for a loan. This will help you better understand your borrowing power and likelihood of loan approval, It will also tell you what type of lender you may qualify with.
You can quickly and easily check your credit score for free using Loans Canada’s CompareHub.
Step 3: Compare Lenders
Not only does CompareHub let you check your credit score, but you can also use it to compare lenders and their loan offers based on your financial and credit profile. Be sure to compare things like:
- Interest rates
- Loan terms
- Fees and penalties
- Eligibility requirements
Step 4: Gather Required Documents
Most lenders will ask for the following documents to verify your identity and income:
- Government-issued photo ID
- Proof of income (pay stubs, bank statements)
- Proof of residency (utility bills, lease agreements)
Step 5: Apply
Once you find the lender you want to work with, you can apply directly with them. Online lenders tend to process loan applications faster and can even provide funding the same day.
Step 6: Review And Sign The Loan Contract
If you’re approved, carefully review the loan contract to ensure you understand all terms and fees. If all looks good, sign the contract, get your funds, and start making loan repayments according to the repayment schedule.
Final Thoughts
Applying for a long-term loan can be a great way to fund big expenses while spreading out your loan over a long period. Just be sure the lower payments justify the higher interest charges you’ll pay. Choose a lender who fits your needs, and do some research to ensure you make a choice that makes most financial sense for you.
Long-Term Loan FAQs
What are the requirements for a long-term personal loan?
What kind of fees should I watch out for when applying for a long-term loan?
Where can I get a long-term loan in Canada if I have bad credit?
®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.
