Best Personal Loans in Canada
Renee Sylvestre-Williams, Personal Finance Contributor
August 20, 2024 | Fact checked by: Natasha Macmillan, Business Unit Director - Everyday Banking
Sometimes, we could all use some extra cash. Whether the reason is to improve your financial standing – such as paying off some lingering debt with a loan consolidation or upgrading your home’s value with a renovation – or more frivolous, such as taking a vacation, being able to access additional funds can go a long way. A personal loan is a lump sum of money that can be used for any purpose. It is borrowed via a financial advisor with an agreement to pay back the original amount with interest in instalments over a set period of time. Personal loans may also be referred to as instalment loans, consumer loans or long-term financing plans. There are a lot of lenders in Canada who offer personal loans, but how do you choose the best one for your needs?
Best personal loan providers in Canada
Lender |
Loan term |
APR |
Loan amount |
Minimum credit score |
|---|---|---|---|---|
| Spring Financial | 6 to 60 months (5 years) | 0.8% to 46.99% | $500 to $35,000 | N/A |
| Scotiabank | Up to 5 years | 6% to 10% | N/A | undisclosed |
| BMO | 1 to 5 years | 8.99% to 22.99% | $2,000 to $35,000 | undisclosed |
| TD Bank | 1 year minimum to 7 year maximum | 8.99% to 23.99% | $2,000 to $50,000 | 650 |
| CIBC | 1 to 5 years | 9% to 10% | $3,000 to $200,00) (unsecured loan) | undisclosed |
| RBC | 1 to 5 years | 9% to 13% | N/A | undisclosed |
| Mogo | 6 to 60 months (5 years) | 9.90% to 46.96% | $500 to $35,000 | N/A |
| Fig Financial | 24 to 60 months (5 years) | 12.99% to 31.99% | $2,000 to $30,000 | N/A |
| MDG Financial | 36 months (3 years) | 29.78% to 44.80% | Up to $1,600 | Minimum of 560 |
| Easyfinancial | 9 to 84 months (7 years) | 29.99% | $500 to $20,000 | N/A |
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What can I use a personal loan for?
As the name says, you can use a personal loan for anything you like. Since ‘personal’ is a fairly broad definition, you could use the loan for anything, for example moving expenses, renovations and loan consolidation. Other common uses include but you can also use it for wedding expenses, vacation, paying off higher interest consumer debt and any unexpected personal costs – really, the sky’s the limit.
This sets personal loans apart from other loan types such as mortgages, auto, business and student loans; these are for very specific things like a home, a vehicle, your business and for post-secondary education.
Personal loans can range from $100 to $200,000 with terms varying from six to 60 months (five years).
What are the requirements to qualify for a personal loan?
Lenders have a list of requirements as part of the application process. Not all requirements are needed by all lenders but this is what you can expect to be asked:
Income
Some lenders have a minimum income limit as part of the application process. It could be as low as $2,000 a month. For example, CIBC’s personal loan income requirement is $17,000 gross a year.
Collateral
There are two types of personal loans: secured and unsecured. A secured loan is a process where you are approved in exchange for offering assets to the lender, such as your home. If you default, the lender can claim your assets. The benefits of a secured loan is it’s easier to qualify for and you can borrow more at a lower interest rate. The disadvantage is you risk losing your assets if you default.
An unsecured loan doesn’t need collateral. It usually has lower borrowing limits, a higher interest rate and might be tougher to qualify for because there’s no collateral backing it up
This one varies, as some lenders want evidence of full-time employment, while others are fine with part-time or self-employment, as long as there’s proof of a steady income.
This is one of the most important evaluation factors a lender considers before approving a personal loan. A minimum credit score of 600 is ideal as lenders will view you as a lower risk to default. If you’re not sure about your credit score, you can order a report from Equifax Canada or TransUnion Canada either by mail, phone or online for a fee.
Debt-to-income ratio (DTI) is how much of your income goes towards paying off your debt. That amount is calculated as a percentage. Lenders look at the DTI as part of the application process. The lower your DTI, the better the terms of your personal loan.
There is a cost to borrowing money, which is called the origination fee. It’s a percentage of your loan, anywhere between 0.5-8% and is either added to your total loan amount or deducted from it. So if you borrowed $10,000 and your origination fee is 2%, $200 is deducted from the $10,000. So you’ll get $9,800 in cash but you’ll have to pay the full $10,000.
How long does it take to get approved for a personal loan?
It ranges from immediately from an online lender, up to 24 hours for a peer-to-peer lender, and from a few business days to several weeks from a bank or credit union.
How to compare personal loan offers
As when applying for any kind of financial product, it’s important to do your homework. Before applying, make sure you look at:
This is the interest rate you’ll pay on the loan. The higher the APR, the more you’ll pay in interest.
If your rate is fixed, you’ll pay the same amount per month over the period of your loan term. That’s great for budgeting purposes. Variable rates fluctuate based on the interest rate set by the Bank of Canada. If it goes up, so will your monthly payments and vice versa if the rates drop. That can make it difficult to budget.
Also, when looking at loans, check to see if they offer any repayment flexibility. If you have a good financial month, you might want to pay back a little extra. See if that’s possible without paying any penalties – some personal loans may allow accelerated or lump sum prepayments, while others may not.
Loan amount
Some lenders have a lower cap on their loans such as $500, while others lend thousands. Know how much you want to borrow when you start comparing lenders.
As we mentioned before, the length of a personal loan can range from months to years. You might have a longer term if you’re borrowing a large sum of money.
Fees can add up or take away from the amount you get. Make sure you ask or read about the fees that come when you borrow money.
Approval requirements and speed
You might need the money as soon as possible, so pick a lender that will respond quickly (with the best APR and repayment terms, of course).