In Canada, 1.7 million Canadians worked in the gig economy in 2016. Since then, that number has proliferated due to the number of online platforms entering the industry such as Uber, Airbnb, TaskRabbit, and more. The addition of these companies has changed the way Canadians earn an income.
While gig work has become a principal source of income for many Canadians, it has also brought certain disadvantages, particularly with access to credit. Due to the instability of gig work, getting approved for a loan as a gig worker can be difficult.
Thankfully, despite the unique financial problems gig workers face, there are a number of different loans they can rely on for financial support.
Types Of Loans Available For Gig Workers
Below, we’ve briefly discussed a few loan options that gig workers can use depending on their financial situation.
Personal Loan
A personal loan is a classic loan for emergencies due to the fast approvals. There are many alternative lenders who provide funds to applicants the same day they apply. This can make it an incredibly convenient source of financial support during emergencies. Moreover, they are relatively inexpensive compared to other short-term loans like payday loans and credit cards. Personal loans also allow you to spread costs over a period of time. Usually between 3 months to 10 years depending on the loan amount.
Equipment Loan
Being a gig worker often means you have to purchase and maintain your own equipment to keep your business running. Sometimes, you’ll have the funds necessary to buy the equipment yourself, other times you may require some help. In other cases, you may simply want to use credit to keep your cash flow steady.
For times like these, consider an equipment loan. An equipment loan is a loan that is secured by the equipment you buy. Rather than buying the equipment in one lump sum payment, you can spread the payments. You are able to pay for your asset in periodic installments over a period of time, with interest.
Line of Credit
A line of credit provides quick access to cash when business is slow or when there is an emergency. A line of credit gives you access to a certain amount of money, which you can use according to your needs. Interest is only paid on the amount you use. Moreover, like a credit card, you regain access to the amount borrowed as you pay it back.
Invoice financing
If you’re ever strapped for cash due to slow-paying customers, you can use invoice factoring. This lets you sell your invoices to a third party for a certain rate. Meaning, you can expedite your payments and tap into any unpaid invoices that you have now. This can be a better option than waiting and struggling to get your customer to pay.
Where Can You Get A Loan As A Gig Worker?
While traditional banks typically shy away from giving loans to gig workers, alternative lenders are a good substitute for banks, as they can provide gig workers with the financial resources they need to keep their businesses and personal life afloat. Unlike banks, alternative lenders use a number of different factors, in addition to credit scores, to assess the eligibility of a borrower.
Spring Financial is an online consumer lending company that offers innovative financial and credit-building solutions designed to give Canadians the opportunity to build credit, save money and borrow responsibly.With many Canadians struggling with high-interest debt and limited financing options, Spring Financial strives to provide Canadians with affordable and accessible financial products that can help them achieve greater financial freedom. Among their growing suite of smart money solutions, Spring Financial offers $1,500 cash advances, personal loans up to $35,000, and a credit-building program that helps you build credit and save money.
Available in seven provinces, iCash is an online source of fast, small loans that can be used for any emergency. Approved applications are processed within the same day and no documentation is required before the transfer of your funds. You can borrow up to $1,500 with iCash. Every time you pay the loan back following the agreed-upon deadline, you become a more reputable borrower. The increased trust allows you to borrow more each time. iCash uses a Trust Rating System, an algorithmic function that determines your merit as a borrower.
If you’re looking for an open-ended line of credit with credit limits up to $15,000, Fora is the best choice. Fora’s line of credit lets you withdraw funds from your available credit, and repay and redraw as needed. This makes it an excellent option for those seeking flexibility and quick access to cash as needed.Moreover, interest rates start as low as 19.9% and are only charged on the amount you withdraw.
The MogoMini line of credit offers Canadian consumers a great personal loan alternative. Borrowers can access up to $5,000, spend what they need when they need it, make the automatic minimum payments, and finally control their own principal payments. This Mogo product is flexible and users can test drive their line of credit for 100 days to see if it’s the right fit. Access their easy online application via your MogoMoney dashboard and get pre-approved in 3 minutes with no impact on your credit.
easyfinancial offers personal loans from $500 – $20,000 ($15,000 - $150,000 for secured personal loans) with interest rates that are affordable and convenient. Qualifying with easyfinancial is relatively easy compared to many banks and credit unions in the country.
Fairstone is a great choice for consumers looking for loans with affordable payments that meet their needs and budget. As Canada’s leading non-bank lender of personal loans, consumers can get unsecured loans up to $25,000. Homeowners can choose a secured loan (backed by the value of their house) to borrow more money and access lower payments compared to an unsecured loan. Whether you’re looking to consolidate debt into one simple monthly payment, cover unexpected expenses or something else altogether, Fairstone is a great option.
Money Mart is a Canadian financial services provider that specializes in offering short-term financial products, including payday loans, cheque cashing, wire transfers, and installment loans. They're available both in person and online, providing borrowers with different options to apply for loans and access their borrowed funds. Their Payday Boost products are available for up to $1,500, and installment loans are available for up to $25,000. They're known for their easy-to-use services and same-day cash options, making Money Mart a great option for those who have little time to wait for much-needed funding.
Cash Money has been helping Canadians access easy and quick loans for more than 30 years. They offer payday loans, personal loans, and line of credit loans from $1,500 to $10,000. User will enjoy their simple online application, personalized options, and same-day funding. Whether you need to cover an emergency expense or simply need to make it to your next payday, Cash Money can a variety of options to meet your needs.
If you’re short on cash, Bree offers cash advances of up to $500 with zero interest. Bree is an online financial platform that provides interest-free cash advances to help consumers avoid overdrafts and NSF fees. Their mission is to be a dependable and accessible financial source that consumers can trust when they need financial support. Moreover, you can access the money you need with Bree without having to worry about credit checks, interest charges or late fees.
Nyble helps users quickly access a line of credit of up to $250 without credit score requirements. This is a good option for anyone who wants to avoid overdrafts or needs a small amount of cash quickly. Approval is instant and funding takes up to 3 days. But if you upgrade to a paid membership for $11.99 a month, you can receive your money within 30 minutes. Nyble reports your payment history to the credit bureau monthly and approves you for large amounts as you build trust with the platform. You can also track your credit score, earn reward points for improving your score, and access other features such as credit monitoring and digital identity theft protection.
SkyCap Financial has been helping Canadian consumers take control of their financial futures since 2013. Their main goal is to provide alternative financing to all Canadians, regardless of their financial past or credit history. They provide fast and easy short-term loans ranging from $500 to $100,000 and approve applicants in as little as 24 hours. Consumers can take advantage of SkyCap Financial’s quick application and a team of experienced individuals who strive to make your experience as smooth as possible. SkyCap Financial bases all their lending decisions on three main factors, current income, credibility, and stability, so they can approve more Canadians, especially those who have been rejected in the past based on credit issues.
LoanMeNow offers Canadian consumers quick access to the cash they need. They offer loans up to $1,000 with no credit check required. Funds are deposited directly into your bank account within as little as 24 hours. A short-term loan from LoansMeNow can help you cover the cost of an unexpected expense or tide you over until your next paycheque. Whatever your financial needs are, LoanMeNow’s quick approval time means you’ll be able to get back on track as soon as possible.
GoPeer is a peer-to-peer lending platform that connects borrowers with individual investors who fund loans. Through GoPeer, you can get a personal loan for up to $35,000, with flexible repayment terms and competitive interest rates. Interest rates start at 8.99%, depending on your credit profile. GoPeer's unique peer-to-peer model allows consumers to benefit from a more personalized borrowing approach. The online application process is quick and easy, and funds can be deposited into your account in as little as 7 days.
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How To Get A Loan As A Gig Worker
Getting approved for a loan as a gig worker typically requires that you have a reliable income and a steady job. While your income may be strong as a gig worker, you don’t have the stability of a salaried employee, which could be a deterrent when applying for a loan with a traditional lender.
Try An Alternative Lender
As such, you may have better luck applying with an alternative online lender instead. Do some preliminary research into the lenders that offer loans to gig workers based on your income and credit score. Online loan aggregators let you quickly pull up a list of lenders along with their interest rates, fees, terms, and eligibility requirements.
What Do You Need To Apply For A Loan As A Gig Worker?
To apply for a loan as a gig worker, you’ll need to provide the lender with the following:
Your personal information and photo identification
Your income information
Your debt information
You may also be required to supply documents supporting any valuable assets that can be used as collateral.
If you apply with an online lender, you can usually get approved within 24 to 48 hours and receive your funds electronically shortly after.
Borrow Up To $50,000
What Are The Loan Requirements For Gig Workers
Income – The amount of money you make will be looked at. So long as you make over a certain amount, you can be eligible for a loan.
Employment stability – The longer you’ve had your job, the more trust your lender will have in you.
Debt-to-income ratio – The lower your debt-to-income ratio, the less debt you have in comparison to your income, which will increase your chances of approval.
Credit – Many lenders will check your credit to determine your creditworthiness, especially if your employment and income are unstable. Most lenders will be more inclined to loan you money if you have good credit, however, if you have really bad credit, there are lenders who do not require a credit check. Just be aware that these lenders often charge higher rates and fees.
Who Qualifies As A Gig Worker?
Freelancers, temporary workers, contract workers, and other independent workers are the typical terms used to describe gig workers. What these workers all have in common is that they are paid based on completed tasks rather than the number of hours worked. This work style provides an incredible amount of flexibility for the worker. In fact, there are a number of benefits that come with being a gig worker.
Flexibility – Unlike traditional workers who are shackled by 9 to 5 jobs, these workers have the power to create their own hours.
Extra Source of Income – If you’re currently working full-time, but need some extra cash, you can take up a few side-gigs for an extra source of income.
Be Your Own Boss – Micromanagement is a thing of the past for these workers, as they can work at their own pace and complete jobs how and when they want. They are free to be as creative as they want in their approach when they are tackling an assignment.
Financial Problems Gig Workers Face
As freeing as it may seem to work in the gig economy, it also comes with some restraints. Unlike traditional workers who have a steady income, steady hours, and benefits they can fall back, many Canadians who work in the gig economy are faced with financial insecurity due to the low pay, irregular hours, volatile payments, and lack of benefits.
Slow Payments – Due to slow-paying customers and the inability to accept different modes of payments, gig workers struggle with slow payments.
Low Pay – According to Statistics Canada, gig workers have a low annual income with it averaging around $4,300 annually. In fact, approximately 50% of gig workers had at least one wage job in addition to their gig job.
Lack of Job Benefits – If you get sick or need a day off due to an emergency, gig workers don’t have paid time off, insurance, or retirement funds to fall back on. They literally cannot afford to.
Inconsistent Income –Gig workers don’t have a set number of hours they work, so their income is usually quite volatile. Moreover, work is not always readily available even though you are.
Inability to get Credit – Banks typically require a healthy credit score and a steady income to approve you for a loan. However, with a volatile income, many traditional banks won’t give gig workers a loan.
Gig workers aren’t typically eligible for business loans. These types of loans are difficult to get approved for, as they require good credit, proof of business income, and a history of positive financials. Your business may also need to be set up a specific way for tax purposes, which gig workers often don’t do.
How do I show proof of income as a gig worker?
Conventional lenders generally require proof of employment for loan approval. However, alternative online lenders often don’t have such requirements. That means you can still secure a loan as a gig worker without proof of employment. You may need a good credit score to get approved, as well as tax receipts from the past few years to prove your earnings.
Can I get a payday loan as a gig worker?
Yes, payday loans are easy to get approved for, including for gig workers. All you need is proof of income to qualify.
Bottom Line
Being a gig worker can be rewarding and more engaging than a regular 9 to 5 job, but it’s important to be aware of the difficulties people face in this industry. Due to the irregularity of their jobs, many banks are unwilling to lend to gig workers. Fortunately, alternative lenders have different lending standards and are able to support gig workers and their businesses during financially difficult times.
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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