Let’s face it, life is expensive. Owning a home, maintaining a car, and buying groceries, the costs can add up. While these expenses may be covered by your monthly income, other larger or unexpected expenses may require a loan.
A personal loan can help spread costs over a long period, making the expense more manageable. This is particularly true when unexpected expenses pop up. To help cover the costs of a large or emergency expense, a loan from a private lender in Canada can help.
Key Points
1. A private loan refers to financing provided by non-traditional lenders, such as private companies or individuals, instead of banks or credit unions.
2. Private lenders have less strict loan criteria, making them easier to qualify for, even if you have bad credit.
3. There is more risk for private lenders when dealing with borrowers who are unable to qualify for traditional loans, and as such, they may charge higher interest rates and offer less favourable loan terms.
What Is A Private Loan?
As the name suggests, a private loan is a loan from a private lender. But what makes a lender “private”?
Essentially, a private lender is any lender who is not associated or affiliated with a traditional financial institution. Normally, these private lenders are not as constrained by regulations and have much more flexible lending requirements. They often accept borrowers that banks and other traditional financial institutions reject due to poor credit.
A private lender can be a company, a group, or an individual. The private loans that they offer work very similarly to the loans offered by a bank or other traditional financial institutions.
However, because they accept borrowers with poor credit or finances, many private lenders will charge slightly higher interest rates to protect themselves from the additional risk they take. Of course, the actual rate and the terms of each lender will vary.
Best Private Loan Options
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
- Up to $10,000
- Rate
- Up to 34.99%
- Term
- Up to 60 months
Types Of Private Loans You Can Get In Canada
Private lenders offer many of the same loans you expect from banks. Some popular loans you can find with a private lender in Canada include:
Personal Installment Loans
Like banks and other traditional financial institutions, private lenders also offer personal installment loans. It works the same as the one you would get from a bank, except the interest and fees charged will be higher. You may also not get terms that are as flexible. However, if you are someone who is struggling to get a personal installment loan from a bank, you will likely find a private lender who would be willing to lend to you.
Learn more: Direct Private Lenders For Personal Loans In Canada
Private Lines Of Credit
A private line of credit is a flexible type of revolving credit that allows consumers to borrow funds up to a set limit, similar to a credit card. Repayment is based on usage instead of a fixed schedule, so you can borrow any amount, as long as it does not exceed the credit limit. Credit lines typically offer lower interest rates than credit cards, and interest is only charged on the amount withdrawn rather than the full credit limit.
Some examples of personal lines of credit in Canada include:
- MogoMini. The MogoMini line of credit is a flexible borrowing option from Mogo that lets you access up to $5,000 with an open-ended repayment term.
- Bree. Bree offers small cash advances up to $500 with zero interest and no credit checks to help bridge the gap between paycheques, so you can cover urgent expenses without incurring overdraft fees.
- Nyble. Nyble offers an interest-free line of credit of up to $250 without a credit check. It is designed to help consumers access quick cash to cover pressing expenses.
Private Mortgages
In Canada, there are numerous private companies and individuals who offer private mortgages. These mortgages are often easier to qualify for, as lenders are not federally or provincially regulated like the banks. That means the stress test and other requirements are not enforced.
However, these private mortgage lenders typically charge higher interest rates and can have shorter terms than banks.
Private Auto Loans
Like mortgages, there are also a number of private auto lenders in Canada that offer auto loans. You can get a private auto loan straight from the lender or through car dealerships that have partnered up with private auto lenders.
Many dealerships do this in order to provide financing to individuals with good and bad credit. However, like any private loan, it often comes with high interest rates and fees.
Private Student Loans
While the Government of Canada offers many student loan programs at the federal and provincial levels, not everyone can qualify for them. That is when some students have to rely on private student loans.
Depending on your private lender, they may offer you a grace period after graduation. However, some may require payment right away, like a regular personal loan.
Private Business Loans
A business loan provides funds to help companies better manage their cash flow, cover expenses, expand operations, purchase equipment, and invest in growth, among other things. Businesses can get financing from banks, credit unions, alternative lenders, or government programs to achieve their goals and support their financial needs.
Differences Between Banks, Credit Unions And Private Loan Lenders
| Types Of Lenders | Definition | Approximate Interest Rates | Lender Examples |
| Banks | Major financial institutions like Canada’s Big Five banks offer personal loans. They generally offer the best rates but have strict requirements. | 0.5% - 15% | - TD - BMO - RBC - CIBC - Scotiabank - Laurentian Bank of Canada |
| Credit Unions | Credit unions are non-profit organizations that are owned by their members. They offer smaller loans than banks but rates are still affordable. Requirements are also more flexible than banks, but you must be a member (of the credit union) to get a loan. | 3% or more | - Fusion Credit Union - First West Credit Union - PACE Credit Union - DUCA Credit Union - Meridian Credit Union - Vancity Credit Union - Ganaraska Financial Credit Union |
| Private Lenders | Private lenders are easier to qualify for than banks due to their flexible lending standards. Even those with poor credit may qualify, however, they often charge much higher rates than banks, making them a more expensive option. | 8% - 35% | - Spring Financial - LendDirect - LoanMeNow - Consumer Capital Canada - Mogo |
Requirements For A Private Loan
The requirements for a private loan vary depending on the lender and the type of financing you are applying for. However, most private lenders require applicants to meet a few basic criteria.
Common Requirements
Regardless of the loan type, you will typically need to:
Common Requirements
- Be at least 18 years old, or the age of majority in your province.
- Provide valid government-issued photo ID and proof of residency.
- Have a reliable source of income.
- Demonstrate the ability to repay the loan. Some lenders may review your debt-to-income ratio.
- Meet the lender’s credit requirements. While a good credit score can help you qualify for better rates, many private lenders also work with borrowers who have bad credit.
Additional Requirements By Loan Type
Private Personal Loans
In most cases, no additional documentation is required beyond the common requirements above. However, many lenders will ask for instant bank verification (IBV). IBV is a secure, electronic way to confirm your income and identity. You log in to your bank through an encrypted portal run by a trusted third party, such as Plaid or Flinks, and your bank sends the lender a temporary, read-only copy of your statements. It speeds up approval and means less paperwork for you.
In fact, according to a Loans Canada study, having your income deposited via direct deposit can increase your odds of being approved for funding. It showed that applicants paid via direct deposit were more likely to be funded than those paid any other way.
Private Car Loans
In addition to the common requirements, you will typically need:
- A valid driver’s license
- Details about the vehicle you plan to purchase, including the year, make, and model
- Proof of auto insurance
Private Mortgages
Private mortgage lenders generally have more flexible qualification criteria than traditional banks, making them a popular option for borrowers who do not meet conventional lending requirements. For example, many private lenders do not require borrowers to pass the mortgage stress test.
In addition to the common requirements, you will typically need:
- A down payment, usually between 15% and 30% of the home’s purchase price
- Property information, including the address and purchase agreement
- Proof of home insurance
- A recent property appraisal or appraised value
What Interest Rate Can You Get With Private Loans?
Private loan rates are almost always higher than what a bank or credit union charges, because private lenders take on more risk by lending to borrowers with weaker credit. By law, no lender in Canada can charge an effective APR above 35%, so that is the ceiling. Within that range, your rate depends on your credit score, income, debt load, whether the loan is secured, and the lender’s own pricing.
Borrowers with stronger profiles tend to land near the lower end, while those with bad credit sit closer to the cap. Before you commit, it helps to know what is competitive, so compare the best personal loan interest rates in Canada to see how your offer stacks up.
Can You Get A Loan With Bad Credit From A Private Lender?
While some private lenders will work with individuals with bad credit, others may not. As mentioned previously, each private lender has their own set of requirements and will decide what loans to offer and what rates or terms will accompany those loans. It is always a good idea to ask your private lender about their eligibility requirements before applying.
If you have unique borrowing needs, do not be afraid to ask a lender if they will be willing to help you out. They may be more willing to do so than traditional lenders.
Learn more: Bad Credit Loans In Canada
How To Apply For A Private Loan
Private lenders are located all across Canada. While they may be more abundant in urban areas, you can access online private lenders no matter where you live. Different lenders have different specialties and work better for certain situations, so a little legwork helps you find the right fit. Here is how to find a private lender and apply.
Benefits Of Working With A Private Lender
There are several benefits of working with a private lender over a traditional financial institution:
- Convenience. One of the first and most important benefits simply comes down to convenience. Private loans are often easy to apply for and can be completed online.
- Fast approval and funding. Many private lenders have an automated underwriting process that quickens approval decisions. Some lenders even provide instant approvals, which is great for those who need cash urgently.
- Personalized service. Another great benefit of working alongside a private lender is that they can offer personalized services. They will work directly with you to find a good solution for your needs and are generally more flexible and willing to make changes if needed.
- Low requirements. One of the major attractions of private lenders is their flexible requirements. Many accept borrowers with poor credit and look at your overall financial health rather than just your credit score. So, if you have a high income, low debt, and a stable job, your chances of getting a loan from a private lender are relatively high.
- Flexible terms. The terms of these private loans are also more relaxed, which is great for reducing stress. Many will offer flexible repayment plans that most traditional lenders simply cannot offer their clients. Of course, these loans are not perfect, so be sure to read the fine print and be aware of everything you are agreeing to before signing anything.
When Is It The Right Time To Choose A Private Loan?
As a Canadian consumer, there are countless borrowing options to choose from, so it can be difficult to decide when to go with a private lender. Having said that, private lenders offer more accessible financing opportunities to consumers, particularly those who may not meet all the typical criteria of a traditional lender. Here are a few scenarios where a private lender could be the right choice for you.
You Have Bad Credit
For bad credit consumers, a private lender is often more willing to work out a deal that takes into consideration more than your credit score.
You Need An Alternate Option
Working with a private lender may be your only option. If traditional banks and institutions will not offer you the loan you require because of your inadequate financial or credit profile, the next logical step for you is to go to a private lender. As mentioned, these lenders have less strict loan criteria that may be easier for you to meet.
You Are Looking For Quick Approval
Another great situation to make use of a private lender is when you need fast cash to cover a pressing expense. Traditional lenders tend to take longer to approve loan applications and provide funding. If you want quick approval, private lenders are certainly a good option.
Bottom Line
Private loans offer a flexible alternative to traditional financing, catering to consumers who do not meet the criteria of banks. So, if you have bad credit, high debt, or earn a non-traditional form of income, private lenders may be the way to go. However, you should carefully assess the rates, terms, and repayment conditions, as these loans may be more expensive and less favourable in exchange for the accessibility and convenience.
Private Lender FAQs
Yes, there are many private lenders that are willing to extend a loan to borrowers with bad credit. They will often look at other factors to determine your eligibility, such as your income, employment stability, debt-to-income ratio, and more.
Yes, depending on the lender you choose, you can get an unsecured bad credit personal loan with a private lender in Canada. However, you should be aware that an unsecured bad credit personal loan will usually come with high interest rates. Consider adding an asset as collateral to take advantage of better terms and lower rates.
It depends on the lender, the loan type, and your finances. Private personal loans often range from a few hundred dollars up to about $50,000, while private mortgages can be much larger since they are secured by your property. Lenders set your limit based on your income, existing debt, credit, and any collateral you offer.
Private and alternative lenders are usually the easiest to get a loan from. They set their own approval criteria and weigh your overall financial situation, such as your income and job stability, more heavily than your credit score, so they can approve borrowers that banks and credit unions turn down.
Yes, some private lenders will accept steady government benefits, such as the Canada Child Benefit, disability payments, EI, or CPP, as a form of income. Because it counts as reliable income, it can help you qualify, though each lender sets its own rules on which benefits it will accept.
®Fairstone Financial Inc. is a wholly owned subsidiary of Fairstone Bank of Canada.
*Interest rates are subject to change. Actual Annual Percentage Rate (APR) varies based on the province of residence and individual factors like credit details and loan amount. The interest rate on an unsecured personal loan is 31.99% in BC.
†On approved credit. Terms and conditions apply. Interest rates vary by province/territory and from customer to customer based on factors like credit score and borrowing history. See Fairstone’s website for details.
Fairstone Financial Inc. holds high-cost credit licenses in AB, MB (License #85047, expiring 20-02-2026) and QC; it has applied for a high-cost credit grantor license in NL. For license information by province, visit Fairstone.ca/HCCG
In Ontario, Fairstone Financial Inc. is licensed as mortgage brokerage 10821.
In Nova Scotia, Fairstone Financial Inc. is licensed as mortgage lender #2021-3000028.
