What is a personal loan?
In Canada, Personal Loan is a safeguard commonly provided by Personal lenders or financial institutions.
A personal loan, or a consumer loan, allows an individual to borrow money for a personal need. This could be to finance a home renovation, a personal project, a wedding, an unexpected car repair, debt consolidation or almost anything else.
A borrower receives money in a lump sum and agrees to pay it back in instalments over a typical period of 6 to 60 months. These loans can often be approved in under 24 hours. Personal loans are offered by traditional lenders like banks and credit unions, but also alternative lenders including online platforms, payday lenders, pawnshops, or private lenders.
How do personal loans work?
Banks are in the business of making money. When you get a personal loan the lender will give you the total sum upfront. Over the agreed-upon time frame, you will pay that back in instalments with interest. Each of those instalments pays a portion of the principal (the amount you borrowed) and interest
Why should I compare personal loan interest rates?
Assume that you received a $10,000 loan with 10% interest paid over 60 months. If it is paid back in monthly instalments, you would owe the lender $212.47 per month. At the end of 60 months, you would have paid a total of $12,748.23. That is the original $10,000 you received, plus an additional $2,748.23 in interest.
Interest payments and length can make a big difference:
| Personal loan | 10% interest | 6% interest |
|---|---|---|
|
Amount borrowed |
$10,000 |
$10,000 |
|
Rate of interest |
10% |
%6 |
|
Length (in months) |
60 |
36 |
|
Monthly payment |
$212.47 |
$304.22 |
|
Total paid |
$12,748.23 |
$10,951.40 |
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Why apply for a personal loan?
Applying for a personal loan can help you to finance a costly personal project or unexpected expense. Quickly receive a lump sum to cover anything from a car repair to a leaky roof. Or use it to go on a vacation or splurge on a wedding. A loan gives you the flexibility to break large expenses into manageable instalments. The interest rates of a personal loan are often lower than those of a credit card.
What can I use a personal loan for?
You can use a personal loan on almost anything. They are extremely flexible. Have a large expense, but do not have enough to cover it outright? A personal loan can be a good option. Here are some things you could use a personal loan for:
- A home renovation
- A wedding
- A dream vacation
- Debt consolidation
How can I get a personal loan from a bank or an online lender?
- proof of your identity (a photo ID)
- regular income or employment (pay stubs)
- Canadian residency
- a Canadian bank account
How do I apply for a personal loan?
Is a fixed or variable interest rate best?
Most personal loans are offered at a fixed rate. You may see an option for a variable interest rate. Which is best depends on your needs and ability to plan.
A fixed-rate loan has the advantage of transparency. The interest rate and instalment payment terms are known when you sign. If interest rates increase, your instalments are fixed at a lower rate. On the other hand, if interest rates go down, your instalments are locked in at that higher rate. You may pay a higher overall rate for this stability.
A variable rate loan fluctuates based on market conditions and the prime rate, the typical interest rate banks charge borrowers with good credit. This means that your rates may go down or up over time with market conditions. Variable-rate loans usually start a little lower than fixed-rate loans, but you do not have a guarantee that your monthly payment will remain the same.
What are the benefits of getting a personal loan?
A personal loan can be a quick way to finance a home renovation, a personal project, or consolidate your debts. You get the money upfront and agree to pay it back in instalments, weekly, biweekly, semi-monthly or monthly. The interest rates and repayment terms are often more friendly than using a credit card.
- Cover a large unexpected expense
- Pay for a personal project
- Flexibility - break a large expense into smaller instalments
- Lower interest rates than a credit card
Apply for a loan
What are the risks of getting a personal loan?
When applying for any loan, consider your ability to pay it back. Failure to make an instalment payment on time can result in
- Cover a large unexpected expense
- Forfeiting your collateral (for a secured loan)
- The missed payments being reported to credit agencies and negatively affecting your credit score
- Being sued by the lender
Personal loans: how much can I get?
In general, a personal loan can range from just a few hundred dollars to a maximum of $50,000. Different lenders offer different minimum and maximum amounts. How much you can borrow is based on their internal policies and your profile, credit history, and whether the loan is secured or not. Try out loan calculator to estimate how much you can get with a personal loan.
How do I get a personal loan with bad credit?
While a poor credit score will make it more difficult to find a personal loan, it is not the sole factor a lender weighs. Lenders use credit ratings to evaluate a borrower’s creditworthiness, but also look at your income, debt, location and more. Bad credit may mean less favourable lending terms, a request for collateral to secure the loan, or the need to provide a guarantor or co-signer. Safe recommends speaking with your potential lender. Use Safe’s loan comparator to find a lender for you.
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Why apply for a personal loan?
Applying for a personal loan can help you to finance a costly personal project or unexpected expense. Quickly receive a lump sum to cover anything from a car repair to a leaky roof. Or use it to go on a vacation or splurge on a wedding. A loan gives you the flexibility to break large expenses into manageable instalments. The interest rates of a personal loan are often lower than those of a credit card.
What can I use a personal loan for?
You can use a personal loan on almost anything. They are extremely flexible. Have a large expense, but do not have enough to cover it outright? A personal loan can be a good option. Here are some things you could use a personal loan for:
- A home renovation
- A wedding
- A dream vacation
- Debt consolidation
How can I get a personal loan from a bank or an online lender?
Applying for a personal loan is a quick and easy process on a bank or online lender’s website. Some lenders, particularly online lenders, can even deposit your loan into your account in fewer than 24 hours.
Wondering what you need for a personal loan?
When applying for a personal loan in Canada, you will usually be asked for the following:
proof of your identity (a photo ID)
regular income or employment (pay stubs)
Canadian residency
a Canadian bank account
While lenders may have additional requests beyond the list below, preparing these documents ahead of time will help you to get approved more quickly. The lender will evaluate your risk profile and determine an interest rate based on these documents and your credit history
How do I apply for a personal loan?
When you approach a lender, you will go through the following steps from applying until you receive your personal loan:
Applying – Initially, you will fill out an application.
Pre-approval – The lender will pre-approve you for a specific amount.
Negotiating the terms- If they offer more than you need, remember that you are under no obligation to accept the total amount. Speak with a representative and attempt to negotiate the terms.
Administration – Once you and the lender agree to the loan terms they will ask you to provide your documents.
Official approval and signing – The lender will check your documents and ask you to sign the contract. Make sure to review it carefully before signing.
Receiving your money – Once the contract has been signed and returned, you will usually receive your loan in a few business days via direct deposit or an e-Transfer.
Is a fixed or variable interest rate best?
Most personal loans are offered at a fixed rate. You may see an option for a variable interest rate. Which is best depends on your needs and ability to plan.
A fixed-rate loan has the advantage of transparency. The interest rate and instalment payment terms are known when you sign. If interest rates increase, your instalments are fixed at a lower rate. On the other hand, if interest rates go down, your instalments are locked in at that higher rate. You may pay a higher overall rate for this stability.
A variable rate loan fluctuates based on market conditions and the prime rate, the typical interest rate banks charge borrowers with good credit. This means that your rates may go down or up over time with market conditions. Variable-rate loans usually start a little lower than fixed-rate loans, but you do not have a guarantee that your monthly payment will remain the same.
What are the benefits of getting a personal loan?
A personal loan can be a quick way to finance a home renovation, a personal project, or consolidate your debts. You get the money upfront and agree to pay it back in instalments, weekly, biweekly, semi-monthly or monthly. The interest rates and repayment terms are often more friendly than using a credit card.
- Cover a large unexpected expense
- Pay for a personal project
- Flexibility - break a large expense into smaller instalments
- Lower interest rates than a credit card
What are the risks of getting a personal loan?
When applying for any loan, consider your ability to pay it back. Failure to make an instalment payment on time can result in
- Cover a large unexpected expense
- Forfeiting your collateral (for a secured loan)
- The missed payments being reported to credit agencies and negatively affecting your credit score
- Being sued by the lender
- A home renovation
- A wedding
Personal loans: how much can I get?
In general, a personal loan can range from just a few hundred dollars to a maximum of $50,000. Different lenders offer different minimum and maximum amounts. How much you can borrow is based on their internal policies and your profile, credit history, and whether the loan is secured or not. Try out loan calculator to estimate how much you can get with a personal loan.
How do I get a personal loan with bad credit?
While a poor credit score will make it more difficult to find a personal loan, it is not the sole factor a lender weighs. Lenders use credit ratings to evaluate a borrower’s creditworthiness, but also look at your income, debt, location and more. Bad credit may mean less favourable lending terms, a request for collateral to secure the loan, or the need to provide a guarantor or co-signer. Safe recommends speaking with your potential lender. Use Safe’s loan comparator to find a lender for you.
Is a secured loan and an unsecured loan best?
Both secured and unsecured loans have their place. In Canada most personal loans are unsecured. See below to see how they compa
What is a secured personal loan?
A secured personal loan is backed by collateral. This is an asset like a home, vehicle or other property. A car tit#le loan is a great example. The lender may take your vehicle from you if you default on your loan. This is the same concept as a car loan or home mortgage. These loans are offered at lower interest rates than unsecured loans. The larger the loan, the more likely it is to be secured.
What are the advantages and disadvantages of a secured personal loan?
Here are some advantages and disadvantages of secured personal loans:
- Larger loans available
- Lower interest rates
- You risk losing your collateral if you do not pay
- More time-consuming to sign
What is an unsecured personal loan?
Unsecured personal loans do not require a borrower to offer up collateral. The interest rates can, however, be much higher than a secured personal loan. Non-payment can result in being sued by the lender.
What are the advantages and disadvantages of an unsecured personal loan?
- Larger loans available
- Lower interest rates
- You risk losing your collateral if you do not pay
- More time-consuming to sign
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What is an unsecured personal loan?
Unsecured personal loans do not require a borrower to offer up collateral. The interest rates can, however, be much higher than a secured personal loan. Non-payment can result in being sued by the lender.
What are the advantages and disadvantages of an unsecured personal loan?
Here are some advantages and disadvantages of unsecured personal loans:
- Quick, easy approval
- Great option for people with google credit scores
- Higher interest rates
- Smaller loan amounts are available
Personal loans vs lines of credit: Which is best for me?
| Personal Loans | Lines of Credit | |
|---|---|---|
|
Best For |
well-defined needs and projects |
ongoing and recurring needs |
|
Repayment |
structured |
flexible |
|
Rates |
usually fixed |
usually variable |
What is the interest rate for a personal loan?
Current personal loan interest rates may be as low as 4 or 5% or as high as 60% annual interest (the legal limit).
Interest rates will vary greatly depending on the lender and factors like your location, credit score, employment and whether to loan is secure or not. In general, personal loans have higher interest rates than car loans and mortgages but are lower than credit cards.
Banks, credit unions, and some online lenders generally offer the most favourable loan terms. Alternative lenders, especially payday lenders, are more expensive, but they may be more flexible with their lending standards.
How do I get the lowest personal loan interest rate?
To get the lowest rate on your personal loan you will need to compare several offers. Quickly compare personal loan rates and find terms that work for you at the top of this page.
Interest rates vary depending on the lender and your profile in general. The lowest loans go to applications with good to excellent credit and a low debt-to-income ratio.
What is a personal loan agreement?
Personal loan agreements are contracts between a lender and a borrower. They detail the principal borrowed, the interest rate, the term, an amortization period, any fees, and similar information. If you borrow from a bank or traditional lender, they will provide it. Take the time to read the loan agreement before you sign. It is legally binding.
What about personal loans from friends or family?
A personal loan agreement can also exist between individuals. They are not just for traditional lenders. Imagine that you want to lend $5,000 to a sibling. You can. A personal loan agreement between the two of you can help avoid problems down the line.
How can I get a personal loan instantly?
Consider online lenders for instant personal loans. If you have a credit card, many offer cash advances, giving you the option to get cash out of an ATM. Borrowing in this way means borrowing less for shorter amounts of time, often with very high rates of interest. Note that interest may begin to accrue the moment you receive your money with no grace period.
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How can I get a personal loan with no-income verification?
Personal loans with no-income verification do exist. Traditionally, lenders want to see that you have the ability to pay back a personal loan. Without that verification, terms are almost always less favourable. The loan is likely smaller with a short-term and high interest. Some lenders will request collateral. A pawnshop loan or a title loan (to your car) are examples. These loans can be expensive and risk a loss of property if you fail to pay.
Can I use a personal loan for debt consolidation?
Yes. A personal loan can be a great option for consolidating debt and improving your cash flow. The way they work is that the personal loan goes to paying off outstanding debts, leaving you with a single payment. Lower interest and/or a longer-term means less money out of your pocket every month. These loans are often reserved for borrowers with good credit scores.
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How can I get a personal loan while in a consumer proposal?
Unfortunately, getting a personal loan during a consumer proposal is difficult. A consumer proposal is a process for people struggling with existing debt. It is, therefore, extremely damaging to one’s credit score. After this, traditional lenders like banks and credit unions are unlikely to approve a personal loan.
You can work with your Licensed Insolvency Trustee to evaluate your ability to pay both your consumer proposal payments and potential loan payments.
Which bank is best for a personal loan?
The best bank for you may well be different than the best bank for someone else. Your credit score, financial situation and location all affect what is available to you. Safe recommends that you use our personal loan comparison tool.
Some borrowers may prefer alternative lenders. Recently online lenders like Loanz have entered the market with fast turnaround times.
What lenders offer personal loans?
- Smarter Loans
- TD Bank personal loan
- CIBC personal loan
- BMO personal loan
- RBC personal loan
- HSBC personal loan
- CashOne personal loan
- Mogo personal loan
- Borrowell personal loan
- Fairstone personal loan
- Loanz personal loan
Our guides on personal loans
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Personal Loan Payment Calculator
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