Comparing Personal Loans in Canada: All You Need to Know
What You Should Know
- Personal loans provide money upfront that you’ll need to pay back in regular installments.
- Most personal loans in Canada are from a bank, a credit union, or an online lender.
- Interest rates for personal loans generally range from 10% - 20% with term lengths of 6 - 60 months.
- Personal loans in Canada are designed to be predictable and stable in the payment schedule.
Popular Personal Loans in Canada
| Lender | Interest Rate (APR)* | Funding Amount | Term Length |
|---|---|---|---|
| 9.99% - 34.95% | $300 to $35,000 | 9 - 78 months | |
| Get a Loan from | 12.99% - 34.99% | $500 - $10,000 | 9 - 36 months |
| 7.20% - 14.20% | N/A | 12 - 60 months | |
| 8.74% - 9.74% | N/A | 6 - 60 months | |
| 9.50% - 15.00% (approximately) | $5,000+ | 12 - 60 months | |
| 9.65% - 13.20% | $5,000+ | 6 - 60 months | |
| 10.00% - 13.70% (approximately) | $5,000+ | 12 - 60 months | |
| 11.89% - 15.74% | $500+ | 6 - 120 months | |
| 19.99% - 34.99% | $500 - $50,000 | 6 - 120 months |
*Rates Sampled February 13, 2023.
**Approximate rates.
About Personal Loans in Canada
A personal loan provides you with money today that you'll need to pay back in the future. Repayments happen in specified intervals, usually weekly, bi-weekly, or monthly. Your repayments cover the interest and fees on your loan and a part of your principal.
Usually, you can borrow $500 to $30,000, depending on your credit and employment history. Your borrowing limit can exceed $50,000 if you provide collateral. Usually, banks accept a car, home equity, and stock portfolios as collateral, but you can also discuss what you can put as collateral with your lender.
Personal loans typically take between 6 and 60 months to repay. They usually have an interest rate between 10% and 20%, but their APR may be higher due to loan origination fees. You should look at the APR when comparing different personal loan offers.
At the end of 2023, personal loans accounted for about 5.2% of the big 5 banks’ lending portfolio. This article walks you through the different types of personal loans, where to get the best loans, eligibility requirements, and the top alternatives.
Pros and Cons of Personal Loans
| Advantages | Disadvantages |
|---|---|
| - Predictable payments - Flexible purpose - Potential fast funding times |
- Penalties for missing payments - Less flexibility |
Types of Personal Loans
There are 2 types of personal loans: secured and unsecured. The main difference between the two is that secured loans require collateral, while unsecured loans do not.
| Secured Loans | Unsecured Loans |
|---|---|
| Require Collateral | Do Not Require Collateral |
| Higher Principal | Lower Principal |
| Lower Interest Rate | Higher Interest Rate |
| Longer Loan Term | Shorter Loan Term |
Secured Personal Loan
- Lower Interest Rate
- Longer Term Lengths
- Higher Borrowing Limits
- Risk of Asset Repossession
A secured personal loan is backed by collateral such as a car, home, or other assets. Failing to make loan payments will result in the seizure of your collateralized asset. As a result, secured loans are less risky for lenders because they can get their money back if you default on the loan.
Due to this, you'll receive more favorable lending conditions. Personal loans that are secured commonly include:
Unsecured Personal Loan
- No collateral required
- Faster approval times
- Lower borrowing limits
An unsecured personal loan doesn't require any collateral. Due to this increased risk for the lender, you won't receive as favorable lending conditions as you would with a secured personal loan.
Common types of unsecured personal loans include:
- Private Student Loans
- Payday Loans
Personal Loan Requirements
Lenders may also require information about your assets, debts, and income for a personal loan in Canada. Most lenders will run a credit check to determine your eligibility. Lenders will typically require the following documents:
- Proof of Identity: Valid government-issued ID.
- Income Documents: Paystubs, bank statements, tax returns, etc.
- Credit History: Most lenders will check your credit score to determine your eligibility for a loan.
- Banking Information: Required for loan deposits and automatic payments.
- SIN (Optional): Depending on the lender, you may be required to provide your Social Insurance Number.
With this documentation, lenders assess you based on:
Income and Expenses
Lenders use your debt-service ratios (DSRs) to see if you can manage monthly loan payments. A lower DSR increases your approval chances.
Credit Score & History
Your credit score is one of the primary factors lenders use to evaluate your loan application. For some lenders, a minimum score of 660 may be required. If you've declared bankruptcy in the last seven years, banks might not lend to you.
Collateral (Optional)
Lenders may require collateral (assets) to secure the loan. You can also get a co-signer to improve your personal loan conditions.
Where to Get Personal Loans in Canada
Banks
Canada's top banks are a good spot to get a personal loan. These banks are highly regulated, trustworthy lenders with competitive interest rates.
Credit Unions
Canada's credit unions provide good interest rates and are more flexible than banks.
Online Lenders
Online lenders provide the fastest funding because they typically do not require in-person meetings.
Personal Loan Considerations
Interest Rate
Your interest rate is the cost of borrowing your loan. Lenders offer fixed and variable interest rates.
Fees
Fees are the additional costs when taking out a loan:
- Origination Fees: 1% to 5% of the loan principal.
- Non-Sufficient Funds (NSF) Fees: $15 - $55 for missing payments.
- Prepayment Penalty: 1 to 3 months of interest for paying it off early.
Processing Speed
Processing time for approval can range from a few hours to weeks.
Personal Loan Alternatives
If you prefer more borrowing flexibility:
Credit Cards
Credit cards have an interest rate of around 20%, but are suited for small short-term loans.
Line of Credit
A line of credit provides flexibility as you draw money as needed.
Loans for Bad Credit
There are loans specifically designed for borrowers with less-than-perfect credit.
Friends and Family
Requesting funds from friends and family can help with the need for quick cash.