Personal loans are one of the most popular financial tools among Canadian consumers. They offer the opportunity to cover a wide variety of debt and expenses, from unexpected travel to unfortunate car issues.
While finding a personal loan that best meets your unique needs may seem difficult, there’s a large selection of lenders you can choose from. Keep reading for everything you need to know about the best personal loan options in Canada and how to choose the best fit for your finances.
Where Can You Get The Best Personal Loans In Canada?
Filters
- Amount
- Up to $35,000
- Rate
- 9.99% – 35%
- Term
- 9 – 78 Months
- Amount
- Up to $60,000
- Rate
- 19.99% – 34.99%
- Term
- 6 – 120 months
- Amount
- $500 – $10,000
- Rate
- 12.99% – 34.99%
- Term
- 9 – 60 months
- Amount
- Up to $10,000
- Rate
- Varies by product
- Term
- Varies by product
Personal Loan Terms You Can Expect In Canada
- Loan Amounts – Depending on the lender, personal loan amounts can go up to $50,000 or more.
- Interest Rate – Personal loan interest rates are often lower than credit cards but more than home equity loans. They generally range between 9.99% to 35% (APR).
- Loan Term – Personal loan terms commonly range between 6 months to 5 years. However, they can be as short as 3 months and as long as 10 years or more.
Types Of Personal Loans You Can Get In Canada
There are several different types of personal loans you can apply for. Each type has its advantages and disadvantages. One may be better suited for you than the others.
Secured Personal Loans
A secured personal loan involves offering up one or more assets as collateral such as a car or house. This helps reduce the lender’s risk as it provides them with more reassurance that you’ll pay them back and gives them a way to recoup payment if you default.
- Pros – Secured loans often give you a better chance of being approved for a large loan and a lower interest rate.
- Cons – If your debt grows too large and you can’t make your payments, your lender has the right to seize your asset and sell it
Unsecured Personal Loan
An unsecured personal loan works just like a secured personal loan, except it does not require collateral.
- Pros – If you default on the loan, the lender may charge you fees or sell your debt to a collection agency, but it cannot seize any of your assets to recoup payment.
- Cons – Unsecured personal loans generally have higher rates than secured loans. Moreover, it can be harder to qualify for, especially if you have bad credit. Depending on the size of the loan, you may also need a co-signer before you’ll be approved.
Bad Credit Personal Loans
If you have bad credit, you can apply with an alternative lender such as a credit union or a private personal loan lender. These lenders have flexible requirements compared to more traditional financial institutions like banks.
- Pros – Some personal loan lenders don’t require credit checks, they simply base your eligibility on your overall financial health.
- Cons – It’s important to note that these lenders often charge higher interest rates, making them a more expensive option.
What Are The Requirements Of A Personal Loan?
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 at include, but aren’t limited to:
Gross Monthly Or Yearly Income
Lenders typically have a minimum income threshold you’ll need to meet to be eligible for a loan. For example, while some lenders may require a monthly net income of $1,200, others may require $2,000 or more. You’ll need to provide proof of income when applying which may include pay stubs or your T4 slip.
Debt-To-Income Ratio
A debt-to-income ratio of 35% – 44% is the highest lenders want to see in an applicant. Those with higher ratios generally have a lower chance of approval. Lenders may assess this information by asking for your bank statements.
Employment History
Job stability is another factor lenders consider when assessing your creditworthiness. Usually, lenders like to see you’ve been employed for at least 3-6 months with your current employer. You may need to provide an employment letter as proof of employment.
Credit Report And Credit Score
As part of your application process, your lender may ask your permission to do a credit check. Your credit history can greatly affect your ability to qualify for a loan and secure a low interest rate. Some lenders may have a minimum credit score that borrowers must meet to be eligible.
Security/Collateral
Lenders may require collateral such as a car or home, if you have less-than-perfect credit. Moreover, this added security allows lenders to offer better terms, such as larger loan amounts and lower rates since they have the means to recover their money if you default on the loan.
Learn more: Personal Loan Requirements: How To Qualify For A Personal Loan
Can You Get A Personal Loan With Bad Credit In Canada?
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. 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.
Learn more: Personal Loan Eligibility Requirements For Bad Credit Lenders
Documents Required To Apply For A Personal Loan
| Personal Identification Documents | You’ll need to provide and prove your name, date of birth, and address. You can use 1 or 2 government-issued IDs (1 photo) such as a driver’s license or passport. |
| Social Insurance Number (SIN) | Some lenders may request your SIN to conduct credit checks. |
| Employment Documents | You may need to provide proof of employment by providing pay stubs, tax forms (T4 slips) or employment letters. |
| Financial Documents | Most lenders will require 3 months’ worth of bank statements. |
| Bank Account Details | You may need to provide a void cheque for direct deposit and other bank details for the withdrawal of payments. |
How To Apply For A Personal Loan
When applying for a loan, keep in mind that every lender’s process is different. That being said, these are the general steps you can expect when applying for a personal loan:
Step 1. Find The Lender Application
When applying for a personal loan, whether from a bank or an alternative lender, you can generally do so online. However, in-person applications may be available as well.
Step 2. Fill In The Application
When filling out a personal loan application online or on paper, you’ll be required to provide information such as:
- Personal Identification (full name, date of birth, SIN)
- Contact information (address, phone number, email)
- Employment information (where you work, your job title)
- Income information (pay stubs, or bank statements to prove direct deposit amounts)
- Other financial information such as your current debt and assets.
| Note: Many online personal loan lenders use instant bank verification (IBV). IBV is a secure service that allows the lender to access a temporary read-only copy of your bank statement, which they use to verify your income and identity. With this process no documents are required, you simply log into your bank account through a secure portal to provide access to your bank statements. |
Step 3. Submit The Application And Wait For A Response
After you submit your application, the loan approval process can take anywhere from a couple of hours to a couple of days.
If approved, you’ll receive your loan agreement, read through it carefully, and sign on the dotted line.
Step 4. Receive Funds
The majority of personal loan lenders deposit loans directly into the bank account of the borrower. This is done via an electronic funds transfer (EFT). You may also find some smaller lenders who will send you an e-transfer.
Learn more: How To Apply For A Loan
Borrow Up To $50,000
How To Choose The Best Loan Companies In Canada
- Check Your Credit And Finances – By checking your credit and current income and debt obligations, you’ll be better able to asses which lender’s minimum requirements you meet. That way you can apply with lenders with whom you have the best chance of approval.
- Find The Right Lender By Comparing Features – Most lenders will provide a pre-approval which you can use to compare loan offers. Be sure to check the following:
- Interest Rate – The interest rate you’re charged will impact your personal loan cost. The higher the interest rates, the more you’ll need to pay back.
- Fees – Most personal loans come with a variety of fees including, origination fees, NSF fees, early payment fees, administrative fees, loan insurance, etc.
- 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 throughout the loan.
- Repayment Options – Most lenders offer monthly (12 payments per year), weekly (52 payments per year) and bi-weekly (26 payments per year) payments. Choose a lender who offers a payment frequency that best meets your needs. Similarly, if you plan on paying off the loan early, be sure to ask if there are any pre-payment options.
- Reputation – Before choosing a lender, check their reviews online to ensure they are a reputable company.
| Pro Tip: Instead of individually applying with multiple lenders, use Loans Canada to save time and receive multiple loan offers with a single application. |
What Are The Best Personal Loan Interest Rates You Can Get?
The best personal loan interest rates in Canada vary based on several factors, including your credit score, income, the type of loan (secured or unsecured), the lender (traditional bank, credit union, or alternative lender), and the loan term.
However, in general, the best personal loan interest rates in Canada typically range from 9.99% for individuals with excellent credit, to 35% for those with poor credit.
Learn more: Best Personal Loan Interest Rates In Canada
How To Calculate Your Personal Loan Cost
The total cost of your personal loan will be affected by several factors including your interest rate, loan amount, and term length. To calculate your personal loan payments and total cost, use this personal loan calculator.
How Do Credit Scores Affect Your Personal Loan Application?
Along with your income, and current debts, your credit is one of the main factors many lenders use to determine 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.
Learn more: What Credit Score Is Needed For A Personal Loan?
Cost Of A Loan For Different Credit Ranges
In this example, we used a $10,000 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 35% | $11,981.78 | $14,044.47 |
| 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 |
How To Increase Your Chances Of Qualifying For The Best Personal Loan In Canada
If you’re looking to increase your odds of approval for the best personal loan in Canada, there are a few things you can do.
- Add Collateral – As previously mentioned, collateral reduces the lenders’ lending risk. As such, they are more willing to provide a loan when you offer an asset as collateral.
- Get A Cosigner – A cosigner is someone who takes responsibility for your loan in the event you’re unable to make your loan payments. Like collateral, this provides your lender with additional security. As such, you can get a loan more easily, if you get a cosigner for your loan.
- Improve Your Credit Score – Your credit score can greatly impact your creditworthiness. The higher your credit score, the more likely you’ll qualify for a personal loan with the best interest rate and terms.
- Pay Down Current Debts – Before applying, consider paying down some of your debts to help reduce your DTI ratio, a common factor used by lenders when checking eligibility.
Pros And Cons Of A Personal Loan
Before applying for a personal loan be sure to consider the pros and cons of it.
Pros Of A Personal Loan
- Flexibility. A personal loan can be used to cover almost anything. There are very few restrictions on what it can be used for, making it extremely versatile.
- Spread Costs. One of the main benefits of a personal loan is the ability to spread costs over multiple months to years. You can also use it to consolidate debts and lower your payments and overall costs.
- Accessible. Personal loans are one of the most common types of loans available in Canada. There are hundreds of lenders you can get a personal loan even if you have subprime credit or unstable finances.
Cons Of A Personal Loan
- Interest Rates. Personal loan interest rates can go as high as 35% (APR), making it an expensive option in some cases.
- Impact On Credit. If you miss payments or default on your loan, your credit scores can be negatively affected.
What Is A Guarantor Loan And How Can It Help You?
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 before applying.
A co-signer is an individual who agrees to take responsibility for the loan in the event you default. 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.
With a guarantor loan, 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. However, it’s important to be aware that the co-signer is fully responsible for the debt if you fail to pay it back. Both you and the co-signer must be aware of this.
Learn more: How To Get A Guarantor Loan In Canada
Get The Personal Loan You Want
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.
