Your interest rate is the most significant factor when calculating the cost of a personal loan. Since a low-interest rate can help you save hundreds, even thousands of dollars over the life of your loan, it’s important to find the best rate possible. Read this to learn about how and where you can locate the best personal loan interest rates in Canada.
While Canadian personal loan interest rates normally range from 2% to 47% APR, the rate you qualify for can vary according to several factors, including but not limited to:
If you plan to apply for a personal loan in Canada, always start with a bit of research. For instance, here are some of the things you can do to find the best personal loan interest rate in Canada:
As mentioned, longer personal loan terms generally come with lower rates but lead to more interest overall, because you’re being charged an annual rate (APR) for multiple months or years. The opposite is true for shorter terms, which can result in higher interest rates but less interest paid during your loan plan.
Here’s an example to show you the effect of long versus short personal loan terms:
| Personal Loan #1 | Personal Loan #2 | |
| Loan Amount Required | $35,000 | $35,000 |
| Fee | 3% | 3% |
| Total Borrowed | $36,050 | $36,050 |
| Payment Term | 5 years (60 months) | 7 years (84 months) |
| Interest Rate | 7.99% | 5.99% |
| Monthly Payment | $730.79 | $526.47 |
| Total Interest Paid | $7 797.49 | $8 173.11 |
| Total Cost | $43,847.49 | $44,223.11 |
Remember, your credit score can change your interest rate and have a major impact on the final cost of your personal loan. Here’s how it tends to work with Canadian lenders:
In this example, we used a $5,000 loan paid monthly with a two-year term to illustrate how credit scores can affect the total cost.
| Estimated Interest Rate Based On Credit Score | Total Interest Based On Lowest Estimated Rate | Total Interest Based On Highest Estimated Rate | |
| Poor Credit Score (300 - 559) | 18% to 46.96% | $11,981.78 | $15,601.48 |
| Fair Credit Score (560 - 659) | 15% to 35% | $11,636.80 | $14,044.47 |
| Good Credit Score (660 - 724) | 5% to 29.99% | $10,529.13 | $13,417.84 |
| Very Good Score (725 - 759) | 3% to 17% | $10,315.49 | $11,866.14 |
| Excellent Credit Score (760 - 900) | 1.5% to 10% | $10,157.00 | $11,074.78 |
Since every lender has a different way of assigning interest rates, it’ll be a lot easier to calculate your personal loan interest costs with our online Loan Calculator. To compare loans, just enter your credit score range, interest rate, loan amount and term length. The Loans Calculator will then give you several pieces of key information, including your:
Before you apply for a personal loan in Canada, keep in mind that your interest rate isn’t the only cost to consider. Some lenders also charge certain fees and penalties, such as:
In that case, Loans Canada could be the perfect referral service for you. We can help find legitimate lenders and flexible personal conditions in your province or territory. Don’t forget that a personal loan is a serious financial responsibility, no matter how much cash you borrow. So, it’s important to do research and speak with an expert before you apply.
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Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and travelling the world in search of the coolest sights our planet has to offer.
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