Can You Get A Loan While On Maternity Leave

Can You Get A Loan While On Maternity Leave

Written by Lisa Rennie
Fact-checked by Caitlin Wood
Last Updated February 10, 2023

Knowing how much you will need in the future will help you financially prepare for a baby. Depending on your costs, income, and current debts, you may be wondering if it’s possible to get a loan while on maternity leave. Thankfully, applying for a loan while on maternity leave is possible in Canada.

Can You Apply For A Loan While On Maternity Leave?

Yes, applying for a loan while on maternity leave is possible. Mothers who are away from work because they’re expecting or have recently given birth are only entitled to receive a maximum of 15 weeks’ pay. After that, parents may apply for parental benefits which can offer:

  • Up to 40 weeks of leave with the standard parental leave benefit. You can get up to 55% of your income through this benefit (weekly maximum of $638).
  • Up to 69 weeks with the extended parental leave benefit. You can get up to 33% of your income through this benefit (weekly maximum of $383).

Given this situation, new parents may find the next few months financially tight, but a maternity leave loan can help cover any lost income during this time. Traditional loans typically require that you have steady employment and earn a sufficient salary. But since you’re not working during maternity leave, your lender may consider your maternity benefits as a source of income when assessing your loan application. 

If approved, you can use the extra funds to cover a myriad of expenses, including all the costly items needed to raise a baby.  

Where Can You Get A Loan On Maternity Leave?

Loan AmountInterest RateTermProvince Availability
Loans Canada Logo$500 - $35,0002.99% to 46.96%4 - 60 monthsAcross CanadaLearn More
Spring-FinancialUp to $35,0009.99% - 46.96%6 - 60 monthsBC, AB, SK, MB, ON, NB, NS, PEI, NLLearn More
Magical CreditUp to $20,00019.99% - 46.8%12 - 60 monthsBC, AB, ON, NB, NS, PEI, NLLearn More
Lend DirectUp to $15,000Started at 19.99%Open-endBC, AB, SK, ON, NS, PEI, NLLearn More
iCashUp to $1,500Varies by province*Max 62 daysBC, AB, MB, ON, NB, NS, PEILearn More
Speedy Cash$200 - $1,500Varies by province*Next paydayBC, AB, SK, NS, YT, NT, NULearn More
My Canada Payday$50 - $1,500Varies by province*14 daysBC, AB, SK, MB, ON, NSLearn More
Cash MoneyUp to $1,500Varies by province*Up to 62 daysBC, AB, ON Learn More
Money Mart$120 -  $1,500Varies by province*Max 62 daysBC, AB, SK, MB, ON, NSLearn More
godayUp to $1,500Varies by province*Max 62 daysBC, AB, SK, MB, ON, NB, NS, PEILearn More
*The maximum borrowing cost for a payday loan varies by province, learn more here.

How To Get A Loan On Maternity Leave

It’s easier to get a loan on maternity leave these days thanks to the rise in online lenders. Lack of traditional income is no longer a deterrent for securing a loan with alternative lenders that cater to the underbanked. As long as you bring in sufficient income — even from government benefits while on maternity leave — you can still obtain a loan. 

Check Your Credit Score

With a regular source of income, your risk as a borrower will increase. To help offset some of that risk, consider improving your credit as much as you can before applying for a loan. High credit scores indicate that you’ve been a responsible borrower who paid their debts on time. If you’re not sure what your credit score is, you can check it for free through Compare Hub.

Find An Alternative Lender

If you’re looking to take out a loan while you’re off work with your newborn, your best bet is to apply directly with an alternative online lender. Ideally, you should apply for a loan before you leave work, as being employed can strengthen your loan application. That said, alternative lenders often accept other sources of income besides a traditional salary.  

Provide Proof Of Income

You’ll need to provide the lender with proof of incoming funds from the statements you receive from Service Canada. The lender may require that your income meets a minimum threshold, which is usually no less than $1,200 per month, though this varies by lender.  

Get A Cosigner 

If your maternity leave benefits are not enough to meet the lender’s requirements, you may be able to use the income from your partner or parents to bridge the gap. In this case, you could add them to your loan contract as a co-signer, with your lender’s permission.

What Is A Maternity Leave Loan? 

There are alternative lenders in the private lending sphere that specialize in providing personal loans to those who are currently off work and receiving government benefits, including Canadians on maternity leave. 

As long as you bring in an income that meets the lender’s minimum threshold, you may qualify for a maternity leave loan. Depending on the lender, you may also need to meet other criteria, such as a minimum credit score and debt-to-income ratio. That said, many of these lenders do not have such requirements. 

You’ll need to do some comparison shopping to see what each lender’s specific requirements are before applying to ensure to satisfy them.

Types Of Maternity Leave Loans

If you’re looking to take out a loan while on maternity leave, here are a couple of options available:

Maternity Leave Personal Loans

A maternity leave personal loan provides a lump sum of money that is paid back in installments over a specified period, usually anywhere from 6 to 60 months. Payments include both principal and interest portions and can be made monthly, bi-weekly, or weekly. The higher your interest rate, the more you’ll pay towards interest, and vice versa.  

You can borrow as little as $500 up to $50,000, depending on your financial profile and credit score. 

Maternity Leave Payday Loans

A maternity leave payday loan provides you with a lump sum of money that must be repaid in full by the time you receive your next paycheque. 

Since you’re on maternity leave and are not currently receiving pay from work, your payday loan repayment would be due the next time you receive your next pay from the government. No installment payments are involved, and instead, you’re required to make your payment in full when it’s due. 

Payday loans are very expensive, with APRs reaching as high as 546%. As such, you’ll be paying a lot in interest compared to the principal. You need to make sure that you’ll have the funds needed to fully repay the loan by the time payment is due, including both the original loan amount and interest. 

Maternity Leave Guarantor Loans

These are another loan option and are generally more beneficial to borrowers with bad credit or who are having trouble qualifying for regular loans for whatever reason. In order to get a guarantor loan, you would need to get a trusted friend or family member to co-sign your loan. Ideally, they should have good credit and decent finances (reasonable income, steady employment, etc.).

The Pros of Guarantor Loans

  • Rather than your own credit being the deciding factor, lenders will take your cosigner’s credit into account. Even if you have bad credit, you should still receive approval.
  • You’ll be listed as the primary borrower. This means, with every on-time loan payment you’ll be working toward improving your credit score.
  • Since you have a guarantor, you may receive a better interest rate than you would with most bad credit personal loans.

The Cons of Guarantor Loans

  • As with any loan product, you’ll rack up penalties and potentially affect your credit if you don’t keep up with your payments.
  • Choosing an irresponsible guarantor who cannot or does not keep up their side of the agreement will likely cause credit and financial issues for both of you.

What To Look For When Applying For A Maternity Loan

Before applying for a maternity leave loan, consider the following tips to maximize your chances of approval and to get the best deal:

Start Looking Early

If you’re not already on maternity leave, consider applying for a loan while you’re still working. This will maximize your chances of approval since you’re still earning a traditional income and will ensure that the money is in your account before you go on leave. 

Do Some Comparison Shopping

While your bank is always an option for a maternity leave loan, you may want to look into alternative lenders for a loan. In fact, you may have a better chance of getting approved with an alternative lender, especially if you’re already on maternity leave and are not earning as much as you did while working. Alternative lenders are also a better option if your credit score is low.

Get Pre-Qualified

Alternative lenders let you pre-qualify for a loan before applying. That way, you can find out if you’re eligible for a loan and will know what interest rate you’ll pay. 

Look Out For Additional Fees

Interest rates are not the only cost associated with maternity leave loans. There may also be other fees attached to your loan that you should understand, as they’ll add to the overall cost of the loan. For instance, your lender may also charge origination fees, early prepayment penalty fees, and NSF fees, among others.

Gather All Required Documents

Before you apply for a maternity leave loan, get all the necessary documents together so they’re ready to be submitted along with your loan application. These may include the following:

  • Government-issued ID (ie. driver’s license or passport)
  • Proof of income (ie. pay stubs or tax receipts)
  • Letter of employment
  • Proof of residence (ie. utility bills or rental agreement)

Benefits Of A Maternity Leave Loan

Most people don’t realize how expensive it is to have a baby, so some parents may become cash-strapped after having a child. A maternity leave loan can help with the following: 

  • More money available to help with unexpected baby expenses and medical bills  
  • You can take more time off work to bond and care for your baby   
  • You’ll have peace of mind knowing you can spend more time with your baby
  • You can spread your baby costs over a longer period of time.

Drawbacks Of A Maternity Leave Loan

While there are many benefits to a maternity leave loan, there are also some drawbacks to consider: 

  • You’ll have a new monthly payment to keep up with
  • Lenders that offer maternity leave loans typically charge high-interest rates (especially if you have a bad credit score)
  • Your credit score can suffer if you’re unable to afford your payments.

What Is Maternity Leave?

Maternity leave represents the period of time a woman takes off work in order to nurture and raise her newly born or adopted child. This benefit is provided by the government to employed women who are pregnant, just gave birth, or are caring for a newborn or adopted baby. Eligible women can get up to 15 weeks off through this benefit, after which they can choose one of the two options below: 

Standard Parental Benefits – This benefit lasts up to 40 weeks and can be used by both parents.

Extended Parental Benefits – If parents want extra time to care for their children, they may apply for extended parental leave. This benefit offers up to 69 weeks of benefits and is shared between the parents. 

Canada Child Benefit (CCB)Learn More
Nova Scotia Child Benefit (NSCB)Learn More
The Newfoundland And Labrador Child BenefitLearn More
The Ontario Child Benefit (OCB)Learn More
Nova Scotia Child Benefit (NSCB)Learn More
Alberta Child and Family Benefit (ACFB) Learn More
Maternity/Parental LeaveLearn More

FAQs On Applying For A Loan While On Maternity Leave

Can I apply for a maternity leave loan with my spouse or partner?

Yes, many lenders allow you to apply for a loan with a co-signer added to the agreement. You may consider this option if your benefits are insufficient or your credit score is low. If your partner earns an adequate income and has good credit, this will increase the likelihood of loan approval.

Can I borrow from my RRSP while on maternity leave?

Yes, however, it’s important to understand the tax implications by doing so. Withdrawing from your RRSPs early means you’ll be taxed on the funds taken out, which could have a financial impact on your retirement savings.

Does the government offer an assistance program for maternity leave?

Yes, the Canadian government offers maternity leave for mothers and parental leave that mothers and fathers can share. Your position at work will be held for you until you return to work following maternity leave. Quebec residents receive benefits under a separate plan that offers similar benefits to parents.

Who can benefit from a maternity leave loan?

All parents can benefit from maternity leave loans, including birth parents, surrogate mothers, and adoptive parents. With a smaller income and additional baby costs, it can be a struggle for families to keep up with daily finances, especially those already struggling. With a maternity leave loan, both parents can have peace of mind. Aloan will provide a chance for one of the parents to remain home and nurture the child.

Bottom Line On Applying For A Loan While On Maternity Leave

As you can see, with a loss of income, baby expenses, and regular daily costs of living, having a baby is an expensive process. Luckily, there are government benefits and personal loans that could help with financing your maternity leave. Just remember, borrowing money can be risky, but with the right guidance, it can be immensely helpful. You should borrow an amount that will cover the extra baby expenses and the lost income. To ensure your best chances at receiving a loan with your maternity leave, make sure you have a positive credit history, along with at least one current and constant income.

Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.

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