Personal loans are one of the most popular financial tools among Canadian consumers. They offer the opportunity to cover a wide variety of expenses, from unexpected travel to unfortunate car issues. While finding a personal loan that best meets your unique needs may seem like a difficult task, there’s a huge selection of lenders for you to choose from. For everything you need to know about the best personal loan options in Canada and how to choose the best fit for your finances, keep reading.
Every lender’s application process will vary slightly, however, most personal loan lenders examine a few key factors when it comes to approving a borrower. Some areas that the majority of lenders look include, but aren’t limited to:
When it comes to applying for a loan, keep in mind that every lender’s process is different. That being said, these are the general steps you should take when applying for a personal loan:
There are several different types of personal loans you can apply for. Each type has its own advantages and disadvantages, so one may be better suited for you than the others.
If you have bad credit or poor finances and are unable to qualify for a personal loan, then you should consider getting a cosigner. A co-signer is an individual who agrees to take responsibility for the loan in the event you default. A co-signer is typically someone you know such as a family member or friend, however, they must have good credit and finances to be accepted by the lender. Having someone co-sign your loan not only reduces the risk for the lender but also gives you a higher chance of approval and the ability to secure a lower interest rate.
If you have bad credit, you can apply with an alternative lender. These lenders have flexible requirements compared to more traditional financial institutions like banks. In fact, some personal loan lenders don’t require credit checks, they simply base your eligibility on your overall financial health. However, it’s important to note, that these lenders often charge higher interest rates, making them a more expensive option.
| Credit Range | Estimated Interest Rate Based On Credit Range | Explanation |
| Excellent Credit Score (760 - 900) | 1.5% to 10% | Borrowers within this credit range will usually be able to qualify for the best interest rates. |
| Very Good Score (725 - 759) | 3% to 17% | Individuals in this credit range will also generally qualify for the best interest rates. |
| Good Credit Score (660 - 724) | 5% to 29.99% | Interest rates offered to borrowers within this credit range are typically very affordable, but may not be as low as the excellent credit range. |
| Fair Credit Score (560 - 659) | 15% to 35% | Borrowers who fall in the “fair” credit score range may not only find it difficult to qualify for a loan but will usually be charged much higher interest rates. |
| Poor Credit Score (300 - 559) | 18% to 46.96% | Borrowers with poor credit generally have a hard time finding a lender who will approve them. They are also charged high-interest rates due to their risky credit profile. |
When it comes to choosing the best personal loan for your needs, it’s important to compare all the main features, these include:
Your personal loan payments will be affected by a number of factors. To calculate your personal loan payments, you’ll need to consider the following factors:
Loan Amount – Depending on the size of the loan, it may take a number of months or even years to pay back in full.
Loan Term – The longer your loan term, the smaller your payments will be, however, it also leads to more interest paid over the life of the loan. Similarly, shorter terms mean higher payments but lower interest over the course of the loan.
Interest Rate – The interest rate you’re charged will also impact your personal loan payments. The higher the interest rates, the more you’ll need to pay back.
Payment Frequency – The frequency of your regular payments is another factor that can impact your loan payments. Every lender is different, however, most lenders offer the following general payment options:
Assuming you take a $10,000 loan that is being paid over 3 years, find out how much your personal loan payments will be at different interest rates and payment frequencies.
| Monthly Payment | Bi-Weekly Payment | Weekly Payment | |
| 5% | $299.71 | $138.17 | $69.05 |
| 10% | $322.67 | $148.59 | $74.23 |
| 15% | $346.65 | $159.46 | $79.62 |
| 26% | $402.91 | $184.88 | $92.21 |
| 46% | $516.73 | $236.08 | $117.53 |
Along with your income, current debts, and your credit is one of the main factors that many lenders use to determine both your creditworthiness and interest rate. The higher your credit scores are, the less of a borrowing risk they’ll consider you and you’ll likely receive a lower rate because of it. However, the lower your credit scores are, the more of a borrowing risk you’ll be considered and you’ll likely receive a higher interest rate.
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 |
Working to improve your credit is a great step to take before applying for a personal loan. True, even if your credit health is low, there are subprime lenders out there who can grant you the personal loan you need. However, as we said, your interest rate can end up being extremely high, costing you hundreds, even thousands of dollars extra. So, if the present state of your creditworthiness is not where you’d like it to be, you can try to improve it gradually by:
If you’re looking for a low-interest personal loan in Canada, there are a few things you can do to get one. Loan interest loans can be acquired by doing one or more of the following:
If you’ve applied for a personal loan in the past but your application was denied due to your bad credit, there is another loan option that might work out better for you. It’s known as a “guarantor loan” and involves finding a cosigner prior to applying. Your own bad credit will no longer be an issue during the application process. Instead, your approval will hinge on your cosigner’s credit health. Ideally, your cosigner would need to have good credit and a decent income. They would also have to agree to take on the responsibility of your loan payments in the event that you default (you can no longer make your payments on time for some reason).
If you’re interested in applying for a personal loan or are simply looking for more information, we can help. Click the button below to fill out an application to see what your options are.
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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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