Your credit history is a key factor lenders consider when you apply for a loan. But if you’re a student or a newcomer to Canada, you might not have any credit history at all. This can make it difficult to get approved for a loan, but definitely not impossible.
In this guide, we’ll show you how to get a loan with no credit in Canada, and provide tips on how to increase your chances of approval.
1. Get a small personal loan from an alternative lender
You’ll struggle to get approved by a bank if you have no credit history, but that’s not the case with alternative lenders. Many online lenders specialize in personal loans with no credit or bad credit — rather than checking your credit score, they check to see whether you have a steady income and can afford to repay what you borrow.
You can apply for an installment loan online, and it’s possible to get approved and funded within 24-48 hours. However, your lack of credit history means the lender is taking on extra risk, so you can expect high interest rates.
- Plenty of options to choose from
- Easy to apply online
- Fast access to funds
- Higher interest rates for no-credit borrowers
- Watch out for loan fees
- You’ll need to make sure you’re dealing with a legitimate lender
Compare installment loans for people with no credit history
2. Sign up with a pay advance app
Pay advance apps like Nyble and Bree allow you to access a small loan (typically up to $200) to help you get through to your next payday. There’s no interest and no late charges to worry about, and your loan repayment is automatically deducted from your bank account when you get your next paycheque. However, you’ll typically need to pay a subscription fee to use a pay advance app.
- No interest charges
- No late fees
- No credit checks
- Quick and easy to apply
- Monthly subscription fee applies
- Extra fee applies if you want the money instantly
- Pay advance amount may not be enough for your needs
Compare early pay advance apps
3. Get a small personal loan from a credit union
Not all credit unions provide personal loans for people with no credit history, but some do. For example, Vancity offers its Fair and Fast Loan, while Affinity Credit Union offers its Restart Loan.
Designed to help you avoid expensive payday loans, these personal loans with no credit feature fixed interest rates and longer loan terms of up to two years. Loan amounts of $2,500-$3,000 are available, and making on-time payments will help you build your credit history.
- Deal with a trusted financial institution
- Lower-cost alternative to payday loans
- Security of a fixed interest rate
- Not widely available
- Minimum income requirements apply
4. Sign up for an unsecured credit card
If you’re wondering where you can get a loan with no credit, an unsecured credit card might be the answer. These cards can be grouped into two main categories:
- Student credit cards. If you’re studying and have little or no credit history, compare the best student credit cards. Many have special introductory offers and cashback rewards, but you’ll need to settle for a low credit limit.
- Newcomer credit cards. All the major banks (and alternative financial institutions too) offer newcomer banking packages to entice new arrivals to Canada. If you sign up for a chequing account with the same provider, you can also apply for a credit card with no credit history. The bank might also waive the annual fee for the first year or offer a cash bonus to sweeten the deal.
- Newcomers can take advantage of waived annual fees and cash bonus offers
- Convenient access to funds when you need them
- Easy way to build your credit history
- Low credit limits apply
- Higher income and asset requirements if you want a higher credit limit
- Watch out for annual fees and high interest rates
Compare credit cards for students or newcomers
5. Sign up for a cash-secured credit card
A secured credit card requires you to put down a security deposit which then serves as your credit limit. You can then use your card to pay for purchases in-store and online, building your credit history and improving your credit score in the process. And if you miss any payments, the card provider has your deposit as collateral.
- Convenient access to cash
- Good for building credit
- Some cards offer cash back and other rewards
- Upfront deposit required
- Some cards have an annual fee
- Usually no signup bonuses
6. Get a car title loan
Car title loans usually don’t involve credit checks, so your lack of credit history won’t be a problem. The loan is secured by the title of your car, allowing you to borrow up to 50% of your vehicle’s value. You’ll need a car in good to excellent condition to qualify for a loan, and you can even apply and get approved online.
But be aware that car title loans are expensive. Not only can you expect high APRs, but vehicle evaluation fees, vehicle history search fees and other charges can drive up the total cost.
Tip: Some online lenders don’t need to physically inspect your vehicle before approving your loan. Instead, you’ll need to upload photos of your vehicle from various angles as well as your car title.
- Fast turnaround time
- Allows you to access a larger loan amount
- All types of credit usually accepted
- You could lose your car if you can’t repay the loan
- High APRs may apply
- Make sure you’re aware of all fees that apply
7. Get a credit builder loan from an alternative lender
A credit builder loan is designed to help you build your credit history while putting money aside at the same time. Once you’re approved for a loan, you start making regular payments that the lender reports to the credit bureaus. Once you’ve paid off the full loan amount, you can access those funds and your on-time payments will have helped improve your credit score.
There are several online lenders that offer credit builder loans in Canada, so shop around to compare your options.
- Helps you build your credit history
- You can grow your savings
- Good practice at budgeting for loan repayments
- You don’t get the funds until the loan is paid off
- High interest rates
- Small loan amounts won’t suit all borrowers
8. Get a credit builder loan from a credit union
Some credit unions also offer credit builder loans for people with no credit history. The money you borrow is put into a term deposit, allowing you to grow your savings balance even further. The term deposit is used to secure the loan, which can help you access a better loan interest rate, and you can access it once it reaches maturity.
- Build your credit history
- Save money at the same time
- You can earn interest on the money you put aside
- You don’t get the funds until the loan is paid off
- Make sure you check what fees apply
- High interest rates
9. Get a crypto loan
A crypto loan uses crypto assets as security for financing. Crypto lenders likely won’t be concerned with your lack of credit history as long as you can supply a crypto asset as security. However, the volatility of cryptocurrency and a lack of regulation makes these loans highly risky.
- Flexible requirements
- Competitive rates
- Fast funding
- Lack of regulation
- Lose your assets if you default
- May be required to put up additional assets if the crypto value drops
10. Get a payday loan from a licensed payday lender
Another way to get a loan with no credit history is to take out a payday loan. These short-term loans of up to $1,500 offer fast access to funds for any purpose, and your lack of credit history won’t stop you getting approved.
But there’s a reason we’ve included payday loans last on this list: they should only be considered as a last resort. With high fees and short loan terms, payday loans commonly have APRs of 300% or more. This makes it very difficult to budget for your loan repayment in such a short period of time, so consider all other options before opting for this type of loan.
- Loans available 24/7
- Get funded within an hour
- Easy to apply
- Extremely expensive
- Short repayment terms
- Watch out for sketchy lenders and scammers
Is it possible to get a loan with no credit?
It’s possible to get a loan with no credit as long as you find the right lender. But before you start shopping for personal loans with no credit, make sure you set reasonable expectations.
Getting a loan from traditional lenders can be challenging with no credit because these types of lenders tend to extend financing exclusively to individuals with good credit, steady income and low outstanding debts. Alternative lenders are willing to help, but you’ll need to accept higher interest rates.
Where can I get a loan with no credit?
You have several options to consider if you’re looking for a no credit loan:
- Online lenders. These lenders offer a convenient online application process and many are willing to work with bad or no credit borrowers. Rather than relying on your credit score, they look at your income, employment and existing debt levels to work out whether you can afford a loan. Most report to the credit bureaus, which means you can start building credit. It’s also often possible to complete a pre-application that doesn’t impact your credit and gives you an idea of what your loan will look like.
- Credit unions. Credit unions commit to reinvesting earnings to keep savings rates high and loan rates low. They’re often more likely to offer loan options for credit union members with no credit history. These lenders usually give competitive loan terms and interest rates as well as low fees.
- Pay advance apps. If you’re looking for instant personal loans with no credit history in Canada, a pay advance app allows you to access a small, short-term loan. Loans are typically $200 or less and there’s zero interest, but watch out for any fees that apply.
- Credit cards. It’s possible to qualify for a credit card if you have limited credit history, but the maximum credit limit you can access may be restricted. If you already have a card, a credit card cash advance is a convenient way to access funds in an emergency, but you’ll need to watch out for high interest rates and fees.
- Payday lenders. Payday loans should be reserved for financial emergencies only. They often come with excruciatingly high APRs, and not all companies offering loans are legit. Most payday lenders also don’t report to credit agencies, so if you’re looking to take out a loan to build or repair your credit history, a payday loan isn’t the way to go. The only way that a payday loan shows up on your credit history is if you’re unable to pay it back — and that won’t be much help for getting credit in the future. Instead, consider an alternative to get over your financial hump.
- Friends and family. If you’re having trouble obtaining financing from a lender and still need money, consider borrowing from friends or family. You can keep it informal if you have a close relationship with your relatives, or take the safe approach and get a legally binding contract drawn up. Just be warned that borrowing from loved ones can place a big strain on your relationship.
- Crypto lenders. Use your crypto assets as collateral to get a loan. However, lenders will only accept certain types of cryptocurrency, such as Bitcoin and Ether.
How to increase your chances of getting a loan with no credit history in Canada
There are plenty of simple things you can do to boost your chances of loan approval, such as:
- Get a cosigner. If you can find a relative or close friend with strong credit who is willing to cosign your loan, it’ll increase your chances of approval and also help you access a larger loan amount and better interest rate. But your cosigner will need to take on the responsibility of repaying the loan if you can’t, so it’s a big commitment.
- Provide collateral. Providing collateral as security for your loan lowers the risk to the lender. Of course, it also means putting your assets at risk if you default on the loan.
- Provide proof of a steady income. If you’re in steady employment, this reassures the lender that you’ll receive the regular income you need to afford your repayments. So if you’ve moved jobs recently, it might be worth waiting until you’ve been in your current role for at least 3-6 months before applying for a loan.
- Have a low debt-to-income (DTI) ratio. Your DTI ratio reflects how much of your income goes toward paying off your existing debt. It’s a key factor lenders consider when assessing your loan application, and you’ll generally need a DTI ratio of under 40% to get approved.
- Have assets and positive net worth. You can calculate your net worth by subtracting your total debts from any assets you own. If you get a positive number, this means you have a positive net worth — and that makes you a less risky borrowing prospect in the eyes of lenders, especially if you can convert your assets to cash if emergency expenses arise.
- Decrease expenses. Lenders tend to consider how much you make and how much you spend. If you decrease your expenses, the lender will be more likely to extend credit because you’ll have more money available to make payments.
- Ask for less money. The less money you ask for, the less risk you are to a lender. You can also consider financing from multiple sources. For example, you could finance using a hybrid of your own funds, borrowed money from friends or family and a personal loan.
- Make payments on time and in full. Even though you don’t have a formal credit history, some lenders will consider other types of payment history. For example, phone bills, rent and utility bills. If you intend to present these to lenders, be sure your account is kept up to date by always paying on time and in full.
How to build credit to get a loan
If you don’t need a loan right away or have been unsuccessful in your attempts to obtain a loan, consider building your credit score. Here’s how:
- Use a credit building product. Some credit unions and banks offer credit loans and accounts designed to help you build your credit. Secured credit cards act like a regular credit card, but require you to make a deposit which becomes the credit limit. A credit building loan lets you save money while building credit history at the same time. If you use one of these products, the golden rule is to always pay on time and in full. Payment history is the fastest way to build credit.
- Become an authorized user. If you are an authorized user on someone else’s credit product, your credit score reflects the primary user’s financial position. You don’t need to actually use the credit product to reap this benefit. Consider asking a friend or family member with good credit to add you to a credit account. Be sure that the authorized user is someone you trust because their financial habits will reflect on your report too.
- Develop good financial habits. Since you’re starting with a clean slate, you should establish good financial habits now. Financial habits have an indirect impact on your credit score, but you will see the benefits in the long run. Good financial habits include always paying bills on time and in full, having an emergency fund and never overborrowing.
If you’re a newcomer to Canada or you have limited financial history, getting a loan with no credit is easier than you might think. Compare the loan options above to find financing that’s right for you, but watch out for high interest rates. And if you’re still having trouble getting approved, taking time to build your credit and improve your personal finances will boost your chances of securing a loan.
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