Banks and credit unions are often the most obvious choices for personal loans and other loan products, but they typically have very strict lending standards. Those with poor credit or limited assets may struggle to qualify through traditional means.
In cases like these, applying with direct private lenders for personal loans in Canada can be a great alternative.
Key Points
- Private personal loan lenders offer fast and flexible loans to borrowers with all types of financial backgrounds, including those with bad credit.
- Approval is based more on income, employment stability, debt-to-income ratio, and collateral rather than credit score.
- Interest rates and fees are higher with private lenders than with traditional banks.
What Are Direct Private Lenders For Personal Loans In Canada?
These private lenders can be individuals, companies, or groups of investors who lend their capital to others, with no middlemen involved. Unlike banks, private lenders are not subject to the same level of regulation and can set their own approval criteria, loan terms, and interest rates.
This flexibility allows private lenders to work with borrowers from a wide range of financial backgrounds, including those with bad credit. That said, this added flexibility often comes with higher interest rates compared to traditional lenders.
Borrow Up To $50,000
Where Can You Find Direct Private Lenders For Personal Loans?
Most personal loans from private lenders are found online. From application to funding, you can get a personal loan online from most private lenders.
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
How To Get A Personal Loan With A Private Lender
Getting a personal loan from a direct private lender is often faster and more flexible than borrowing from a traditional bank, especially if you have bad credit or non‑traditional income. To get a personal loan from a private lender, follow these steps:
Step 1: Compare Lenders
Start by reviewing several private lenders to find out their interest rates, fees, loan amounts, and approval requirements. Many private lenders specialize in working with borrowers who don’t meet standard bank requirements, so comparing options can help you find one that fits your financial situation.
Always verify whether the private lender is reliable. Terms that are too attractive may indicate potential fraud.
Step 2: Apply
Once you’ve selected a lender, complete their online application. Be sure to upload all required documents so the lender can verify your application.
| Instant Bank Verification (IBV) Instant Bank Verification is often used during this step—it securely connects to your bank account to confirm your financial activity without needing paper statements. |
Step 3: Get Funded
After approval, private lenders typically provide funds quickly, sometimes within the same day or even within a few hours. The loan is typically sent via direct deposit. This fast funding makes private lenders a practical option for covering urgent expenses.
What Documents Do You Need When Applying For A Personal Loan With A Direct Private Lender?
When you apply for a loan, there are certain pieces of information that the lender will want to look at before you get approved. With traditional lending channels, the paperwork you’d need to submit is typically extensive.
Some lenders may require you to provide documents such as:
- Proof Of Age: You’ll need to be the age of majority in your province to get a loan.
- Proof Of Address: Lenders require that borrowers be permanent residents of Canada, which you can prove with a lease or utility bill.
- Existing Loan Documentation: The lender may want to see how much of your income is already going toward other debt obligations to ensure you have enough left over to cover loan repayments.
- Proof Of Employment & Income: The lender will want to verify if you are working and if your income will adequately cover the loan payments.
However, with private lenders, many verify your information using instant bank verification.
Can You Get A Personal Loan With A Direct Private Lender If You Have Bad Credit?
Many private lenders do not put as much emphasis on your credit score as a bank would. Instead, they place more weight on other factors, including the following:
- Income: Income is a key factor in qualifying for a bad credit loan. As long as you have enough income to support your loan payments, your lender will consider you for a loan.
- Employment Stability: Direct private lenders usually want you to be employed for at least 3 months to ensure the stability of your job.
- Debt-To-Income Ratio: Lenders will assess your debt-to-income ratio to see if you can afford the loan after your monthly debts.
- Collateral: If you have collateral to offer, it can help you qualify for the loan. If you default, the lender has a valuable asset they can recover and sell to offset potential losses.
Learn more: Personal Loan Eligibility Requirements For Bad Credit Lenders
Pros Of Direct Private Lenders For Personal Loans In Canada
Here are a few perks to working with a private lender:
- Any Credit Is Accepted: You may not need a good credit score to qualify, unlike with traditional lenders. Private lenders typically accept borrowers with a wide range of credit scores, including those with bad credit.
- Funding Time: Private lenders often use automated underwriting to expedite approval and funding. Some lenders will provide the loan within a day after submitting the loan application.
- All Online: The entire process can usually be completed online. From application to funding, it can all be done online.
- Flexible Terms: Whether you’re looking for a short-term loan or a long-term loan, you can find terms between 3 months to 5 years with most private lenders.
Cons Of Direct Private Lenders For Personal Loans In Canada
Consider the following potential drawbacks before applying for a loan with a direct private lender:
- Interest Rates Can Be High: Interest rates tend to be higher than traditional loans, making these loans more expensive. However, by law, no lender can charge you an APR over 35%.
- Fees: When working with direct private lenders, there are certain fees to beware of, including administrative and loan origination fees.
| Best Time To Consider A Private Personal Loan A private personal loan can be a good option if: – You’ve been denied by your bank because of bad credit, high debt or limited income (whether it’s because you’re a single parent or have limited resources). – You need funds quickly, such as for moving expenses, car repairs, emergency travel, or medical bills. – You’re self-employed or work contract jobs, and your income doesn’t meet traditional bank criteria. |
Cost Of Personal Loans From Private Lenders
Private lenders generally charge higher fees and interest rates than traditional lenders. However, by law, they cannot charge you an APR exceeding 35%.
Here’s how much a $5,000 private loan would cost you at 15% and 25% APR.
| Loan Amount | $5,000 | $5,000 |
| Interest Rate | 15% | 25% |
| Loan Term | 12 months | 24 months |
| Monthly Payment | $451.29 | $475.22 |
| Total Paid | $5,415.50 | $5,702.65 |
| Total Interest Paid | $415.50 | $702.65 |
Note: This is for illustrative purposes only. Numbers are calculated using an online loan calculator.
Are Direct Private Lenders Safe?
Yes, many direct private lenders in Canada are trustworthy and offer a secure borrowing experience. For people who need more flexible options or don’t meet traditional bank requirements, a reputable private lender can be a reasonable alternative.
How To Choose A Reputable Direct Private Lender In Canada
Before committing to a loan with a private lender, it’s still a good idea to verify that the lender is credible. Reliable private lenders are:
- Upfront about their fees and conditions
- Make communication easy
- Follow all applicable Canadian regulations
| Bottom Line: A trustworthy lender will be transparent, explain your options clearly, and provide a clear breakdown of costs. If anything seems unclear or rushed, that may be a warning sign. |
Other Financing Options Available From Direct Private Lenders
Besides personal loans, other financing options may be available from direct private lenders in Canada:
Lines Of Credit
Some direct private lenders in Canada offer lines of credit, though they are less common than personal loans or mortgages. These can be secured against assets (like property) or unsecured, but they typically come with higher interest rates and shorter terms than bank lines of credit.
Similar to a credit card, a line of credit gives you revolving access to funds up to a set limit. You only pay interest on the amount you actually use. Funds can be drawn and repaid multiple times, making them useful for ongoing expenses like renovations or emergencies. Lines of credit from direct private lenders are best suited for borrowers who need quick, flexible funding and can’t qualify through banks.
Mortgages
Private lenders frequently offer mortgages for borrowers who may not qualify with banks. These work the same way as bank-issued mortgages, with the property securing the home. Funds are issued on a lump sum, then repaid via installments that include both principal and interest.
Final Thoughts
Private lenders offer borrowers an alternative path to obtaining a personal loan, especially for borrowers with bad credit. While banks and credit unions are an option, private lenders may provide those with subpar credit a better chance of loan approval. Be sure to work with the right lender who can provide you with the loan you need without putting you in a position where you are unable to make good on your loan payments.
