Personal loans are versatile credit products that can be used for any expense, such as a car repair, a wedding, or a medical emergency. Depending on the lender, you can get personal loans between $500 to $35,000 with affordable rates and flexible terms.
However, the amount you qualify for will depend on your credit and overall finances. These loans can also be secured or unsecured and can come with variable or fixed rates, making them a flexible financial solution.
Key Points
- A personal loan is a financing option that provides a lump sum of money that can be used for various purposes and is repaid in fixed installments with interest over a set term.
- Loan amounts generally range from $500 to $35,000, with rates ranging from 9.99% to 35% (APR), and loan terms between 6 months to 5 years.
- Personal loans are available from banks, credit unions, loan brokers, and private lenders.
- Personal loans may be secured (using collateral) or unsecured (no collateral).
- The terms of your personal loan will depend on several factors, including your credit score, income, debt, and assets.
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
- Up to $10,000
- Rate
- Varies by product
- Term
- Varies by product
- Amount
- $500 – $100,000
- Rate
- 12.99% – 34.99%
- Term
- 9 – 60 months
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 higher 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.
Learn more: Best Personal Loans In Canada
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 and finances to 35% for those with poor credit and finances.
Learn more: Best Personal Loan Interest Rates In Canada
Where Can You Get A Personal Loan In Canada?
Personal loans are available from multiple sources in Canada:
Banks And Credit Unions
Traditional banks, such as RBC, CIBC, Scotiabank, BMO, and TD Bank, offer personal loans with competitive rates and high loan amounts. However, you’ll typically need excellent credit to get approved. Local credit unions also provide personal loans to their members, often with lower interest rates and flexible terms.
Loan Brokers
A loan broker serves as an intermediary between borrowers and lenders. Brokers don’t provide the loans themselves, but instead help borrowers find the right lender based on their credit and financial profile. They have access to a network of lenders and work on behalf of borrowers to ensure they get the best deal.
Private Lenders
Private lenders are not subject to the same strict regulations that banks must adhere to. Given this, private lenders have more freedom when it comes to their loan criteria. More specifically, they may be more open to working with bad credit borrowers or those with non-traditional income sources.
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 gives them more reassurance that you’ll pay them back and 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.
Learn more: Unsecured Personal Loans
| Can You Get A Bad Credit Personal Loan? If you have bad credit, you can apply with a private personal loan lender. These lenders have flexible requirements compared to more traditional financial institutions like banks and usually accept bad credit. Moreover, 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 |
Can You Get A Personal Loan With Low Income?
Even if you earn a low income, there are still ways you can qualify for a personal loan. However, your chances of approval depend on the lender and their loan criteria.
Generally speaking, low-income earners have better odds of loan approval when applying with a private lender. These lenders have less strict loan requirements and may accept borrowers with lower income levels compared to traditional lenders. Some may even accept non-employment income sources, such as government benefits and pension payments.
That said, you’ll still have to prove your ability to cover the loan payments. As such, you may have to settle for smaller loan amounts if you don’t earn very much. In other words, the loan amount you request shouldn’t be too much for your income to handle.
Learn more: Personal Loans For Low Income Earners
How Fast Can I Get A Personal Loan In An Emergency?
There may be times when you need urgent access to cash to cover a pressing expense. In this case, you’ll need to look for a personal loan that can provide you with immediate funding.
Fortunately, there are many alternative and online lenders that provide quick funding, sometimes within hours of loan approval. You can typically apply online and have the funds deposited directly into your bank account via e-transfer, as long as everything on your application checks out.
Learn more: Can I Use a Personal Loan For Emergencies?
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 for 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.
The higher your credit scores are, the less risky you’ll seem as a borrower, 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.
Some lenders may have a minimum credit score that borrowers must meet to be eligible.
Learn more: What Credit Score Is Needed For A Personal Loan?
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
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. |
Instant Bank Verification (IBV)
Instant Bank Verification is a digital process that allows lenders to instantly verify an individual’s bank account details and financial information, including their income, account balances, and recent transactions. This is done securely through a third-party provider, like Flinks.
IBV benefits both lenders and borrowers. It provides lenders with a quick and accurate way to access a borrower’s financial data to assess their eligibility. Further, it speeds up loan approvals for borrowers while ensuring data is kept secure.
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
Your Personal Loan Borrowing Rights
As a borrower in Canada, you have certain rights when it comes to how you’re treated by lenders. In general, lenders are required to clearly stipulate the costs and terms of your loan. They also have limits in terms of how much they can charge you and restrictions on how they collect repayments.
For instance, consider the following:
- Fee disclosures: Lenders must provide borrowers with details about all costs and loan terms, including interest rates, fees, and repayment schedules. This must be done before the borrower signs the loan contract.
- Fair payment collection practices: Lenders cannot harass borrowers when they attempt to collect unpaid dues. There are specific practices that lenders are allowed to use, and others that they are not.
- Right to cancel: Some loans allow borrowers to cancel their loan agreement within a certain period of time without penalties. This is known as the cooling-off period, and is usually around 48 hours after loan acceptance, depending on the province and the loan type.
- Interest rate limits: In Canada, the interest rate of a high-cost personal loan cannot exceed the criminal interest rate of 35% APR.
That said, you also have responsibilities when it comes to how you handle your loan. More specifically, you’re required to repay the loan as per the terms of your loan agreement. You also owe it to yourself to manage your debt responsibly so you don’t overleverage yourself and wind up spiralling in debt.
| Can You Take Out Two Or More Personal Loans? Unlike payday loans, there are no limits on how many personal loans you can take out with a lender. That said, it’s not ideal to take on too much debt at once as you’ll only be putting more stress on your finances. |
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.
Learn more: Personal Loan Pros And Cons
When Is A Personal Loan A Good Choice?
A personal loan can be a great option because it provides flexibility and lower rates compared to other borrowing options. You can use the funds to cover unexpected expenses, large purchases, or for debt consolidation purposes, making it a flexible and useful borrowing option.
Why Personal Loans May Be A Better Option Than Payday Loans
Personal loans are typically a better choice compared to payday loans because they offer lower interest rates and longer repayment terms, making them more affordable and easier to repay. Payday loans come with very high fees and short repayment terms, making them quite expensive and difficult to pay back by the due date.
Further, you’ll be more likely to get a higher loan amount with a personal amount compared to a payday loan. Personal loans can be made for upwards of $50,000, while payday loans typically cap out at $1,500.
Why Personal Loans May Be A Better Option Than Credit Cards
Personal loans generally feature lower interest rates than credit cards, making them a more cost-effective borrowing option. You’ll also get a lump sum of money upfront with a personal loan, which can be useful for covering large expenses. Further, personal loans feature a fixed repayment structure, unlike credit cards which can be difficult for undisciplined borrowers to manage payments, which can lead to an accumulation of high-interest balances.
Learn more:
Why Personal Loans May Be A Better Option Than Lines Of Credit
Personal loans provide a lump sum of money upfront and a fixed repayment term, making them a more predictable financing option compared to credit lines, which have flexible credit limits, variable interest rates, and a relatively unstructured repayment plan. While lines of credit may be useful for those who need a financial backup when the need for extra funds arises, personal loans are more suitable for those who need a large sum of money to cover large expenses and prefer the stability of regular and consistent repayments.
Bottom Line
If you need a lump sum of money for a large expense and want fixed repayment terms and lower interest rates, then a personal loan may be the right financing option for you. With a personal loan, you’ll have the flexibility to use the funds as you see fit, while enjoying a predictable monthly payment structure. Compared to credit cards or payday loans, personal loans may be a better option if you’re looking to keep costs down with a more budget-friendly loan option.
