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When you need to borrow money, there are numerous options to consider. From credit cards to mortgages, the type of credit you borrow money from will vary. Borrowing money can be a great option when you want to purchase or finance something expensive like post-secondary tuition or a car. Rather than paying the entire amount upfront and exhausting your savings, financing can help make things more affordable. 

How To Borrow Money In Canada

You can borrow money from a variety of lenders, including banks, credit unions, alternative online lenders, and private lenders. The lender you choose will depend on your financial profile and creditworthiness. Traditional lenders typically require good credit and a strong income, while alternative lenders often accept bad credit and a lower income level. 

Depending on what you need the money for, there are several types of loans available, such as personal loans, payday loans, car loans, mortgages, and home equity loans, to name a few. 

Find The Right Loan For You


What Do You Need To Borrow Money In Canada?

To borrow money in Canada, you’ll first need to meet a few basic requirements, including the following:

Canadian Residency

One of the most basic requirements for lenders is that you must be either a Canadian citizen or a permanent resident to take out a loan in Canada. Without citizenship or PR status, you won’t be eligible for a loan.

You must also be the age of majority in the province or territory you live in, which is generally 18 or 19 years of age. 

Credit Score

Your credit score can play an important role in your ability to get a loan. Many lenders will check your credit as part of their underwriting process. You’ll usually need good credit to take out a loan from a bank or credit union. 

A higher score means you’ve been making timely payments on your debts, which makes you a less risky borrower. This reduces the risk for the lender and increases your chances of loan approval. If your score is on the lower side, you’ll have better luck with alternative lenders. These lenders base approval on your overall financial health and put less emphasis on your credit score. However, they generally charge higher rates as a result. 

Check out what your credit score is for free using the Loans Canada Compare Hub platform to see where you stand. 

Debt-To-Income Ratio (DTI)

Your monthly income relative to your debt is referred to as your debt-to-income ratio. Simply put, your debt-to-income ratio gives lenders an idea of how much of your monthly income is dedicated to paying your current bills and helps them define your borrowing risk. 

Lenders generally like to see a DTI of no more than 43%, though many lenders cap this ratio at 36%. The lower your DTI, the higher your chance of loan approval with a lower interest rate.


To borrow money, you’ll need some source of income. Your lender will assess your income when you apply for a loan to ensure that you can cover your loan payments. The more money you want to borrow, the higher your income may have to be. 

If you’re currently on EI, maternity leave, or some other government benefit, you can still qualify for a loan. However, you’ll need to apply with lenders who accept these benefits as sources of income. 


Job stability is another important factor that lenders look at when determining whether or not to approve a loan application. Most lenders prefer you to be employed for at least 3 to 6 months.  

Ways To Borrow Money In Canada

As mentioned, there are multiple ways to borrow money in Canada. Here are some of the most common options: 

Personal Loan

Personal loans are a financing solution that can be used for virtually any purpose. You can borrow up to $35,000 or more depending on your finances and the lender you apply with. They have fixed scheduled payment structures and interest rates that range between 5% to 47% APR.  

Pros: With a personal loan, you can spread your costs over 3 months to 5 years or more. 

Cons: Personal loans often have fees that can add to the cost. For example, you may be charged loan origination fees and penalty fees for prepayment or late payments. 

Balance Transfer

If you’re struggling with credit card debt, a balance transfer might be the right option for you. Certain credit cards offer zero-interest introductory periods for balance transfers. This means you can take your credit card debt and transfer it to another card with a zero interest rate. Thus, you’ll be borrowing that money for free, but only for a very short period of time. Typically 6 or 12 months. Balance transfers are ideal if you can repay the amount on time, if you can’t, you’ll end up paying high interest. 

Pros: Low or 0% interest for a specific period (usually 6 months), and flexible repayment.

Cons: High-interest penalties if you don’t pay in time, hidden fees, and need to have an existing credit card debt.

Home Equity Loans

A home equity loan uses the equity you’ve built up by paying off your mortgage as collateral. Home equity loans are similar to personal loans in many ways. But the main difference is personal loans usually have no collateral. Home equity loans are installment loans and require regular payments. Depending on the lender, you will need to have at least 20% equity built up. You’ll be responsible for making your original mortgage payments as well as payments toward your home equity loan. 

Pros: Lower interest rates and they can be used for any purpose. 

Cons: Could lose your house if you don’t repay the loan.

Peer-To-Peer Loans

Instead of borrowing from traditional institutions. Such as banks or credit unions. You can borrow from other individuals through peer-to-peer lending markets. This type of financing is structured similarly to personal loans but can be a great alternative for individuals who don’t qualify for traditional financing. 

Pros: Quick turnaround times, low credit scores are okay, and flexible payment terms are sometimes an option.

Cons: No guarantee that you’ll get funded, origination fees are sometimes high.

Credit Cards

Credit cards offer flexibility for consumers who need access to a quick form of financing. One of the main benefits is that you don’t need to repay your credit card balance in full, you can simply make the minimum payment. Although, if you don’t pay the balance in full when it’s due, you’ll accrue interest charges. It’s always a good idea to pay off your credit card balance in full each month as credit card debt is expensive and can snowball quickly. Credit limits are much lower on a credit card which is ideal if the expense you’re incurring is under $1,000.

Pros: Widely accepted, flexible repayment, low credit limits, and additional perks (for example, rewards and purchase protection).

Cons: Possibility of taking on too much debt, high-interest rates, and penalties for late payments.

Line Of Credit

If you’re unsure of the final cost of your expense, a line of credit is an optimal solution. Lines of credit have a maximum amount you can borrow, but you don’t have to borrow the entire limit, only what you need. Once you take out money, you only need to pay interest on the outstanding balance until it’s fully paid off. A line of credit can be used over and over again. Plus, the payment schedule is extremely flexible. 

Pros: The amount you can borrow is flexible, it can be reused in the future, helpful for individuals with irregular income and expenses. 

Cons: Borrower fees are sometimes applicable and difficult to qualify if you have a low income or short credit history.

What’s The Best Way To Borrow Money For Me? 

Before choosing a financing option, it’s best to consider your goals and current financial position. Knowing that information can clear up a lot of questions regarding what financing will work and what won’t. To help determine which option is best, consider the below factors: 

  • Affordability and cost
  • Lender reputation
  • Loan purpose
  • Financing offers and comparison
  • Processing time 

Bottom Line

Everyone has unique financial needs and goals, the idea is to find what works best for your circumstances. Personal loans might be the right decision, or another financing option might be more optimal. If you’re unsure of which option is right for you, Loans Canada can help you research and weigh your options and find the right product or lender.

FAQs On Borrowing Money

How can I borrow money immediately?

If you need to borrow money right away, consider applying for a payday loan, short-term personal loan, or pawn shop loan. These loans typically involve quick approval and funding. In fact, you can get your hands on the borrowed funds within hours. Just be mindful of the high cost of borrowing that comes with these types of loans.

Can I borrow money without credit?

It’s tough to borrow money if you have bad credit or no credit at all, as lenders typically require good credit for loan approval. However, it’s still possible to get approved for a loan without credit. If you’re in this situation, look for a lender that will accept collateral to back the loan in lieu of good credit. Or, consider applying for a payday loan, which usually doesn’t require a good credit score for loan approval. Just keep in mind that these loans come with very high-interest rates.

Which loan is easiest to qualify for?

The easiest loans to get approved for are payday loans. These are short-term loans that you must pay back in one lump sum by the time you receive your next paycheque. Repayment terms can range from a week to 2 months, though 2-week terms are more common.
Lisa Rennie avatar on Loans Canada
Lisa Rennie

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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