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Compare low interest loans in Canada
Are your finances in good shape? Find lenders that offer low interest personal loans in Canada.
If you have a good to excellent credit score, you can apply for low interest loans in Canada. The application for low interest personal loans is more involved, but if you’re approved, you’ll put more money down on your principal and save over the life of your loan.
Compare low interest loans in Canada
Browse personal loans with low interest from a range of lenders.
|Loan provider||Interest rates||Loan amount||Loan term||Eligibility requirements|
|8% – 46.96%||$100 – $50,000||36 - 60 months||Recommended income of $40,000 /year, no payday loan debt, min. credit score of 650|
|5.4% - 46.96%||$300 – $50,000||4 - 60 months||Steady income|
|6.99% – 46.96%||$100 – $50,000||3 - 120 months||Steady income|
|9.99% - 46.96%||$500 – $35,000||6 - 60 months||Min. income of $1,800 /month, 3+ months employed, 500 min. credit score|
|19.99% - 39.99%||$500–$15,000||9 - 60 months||Min. income of $3,333 and min. 600 credit score|
|9.90% - 46.96%||$200 – $35,000||6 - 60 months||Min. income of $13,000 /year, min. 500 credit score|
|6.99% - 32.00%||$5,000–$50,000||24 - 84 months||Min. $50,000 annual income and a credit score above 650|
|9.65% - 13.20%||Not specified||6 - 60 months||Stable income and credit score above 650-680||Read review|
|7.99%–8.99%||Not disclosed||Not disclosed||Stable income and credit score above 650-680||Learn more|
(Windsor Family Credit Union)
|From 8.5%||Not disclosed||1 - 5 years||Stable income and credit score above 650-680||Learn more|
What is a personal loan with low interest?
What’s considered a low interest rate? Based on the latest information available from the Bank of Canada, the average interest rate for personal loans is 9.35%. This includes loans with collateral (such as auto loans) and loans without collateral. You may end up paying more once your personal variables are factored in.
The Bank of Canada increased its rate eight times from March 2022 to January 2023, which increased personal loan rates in Canada.
Personal loan rates will depend on your situation
An unsecured personal loan with low interest will usually have a rate that sits between 8% and 11% for fixed interest rates, but it really depends on a borrower’s credit score and other personal factors. What may be considered low for one borrower may not be low for another. If your finances are strong and you’re willing to provide collateral such as your house, you might score a rate around 5.4%, according to some lenders. But keep in mind that very few people can qualify for the lowest rates.
Why can’t I qualify for the lowest rate with a lender?
It’s difficult to get the lowest advertised rate with any lender because this rate is usually reserved for “ideal” borrowers. This includes those that have high incomes, own multiple assets and have little debt. While it still pays to apply for an advertised rate that interests you, be prepared for rate adjustments once all of your personal variables have been factored in.
Variety of personal loan rates in Canada for good and bad credit scores
Where can you get low interest loans in Canada?
The following types of lenders offer low interest loans for good to excellent credit:
- Banks. Banks have strict eligibility requirements for personal loans, but they offer competitive interest rates.
- Credit unions. Credit unions offer low rates that are equal to or better than banks. However, you’ll need to apply for a membership with the credit union.
- Peer-to-peer lenders. An online peer-to-peer lending platform like goPeer can reduce operating costs and pass on those savings to the borrower via low interest rates.
- Online lenders. These lenders have higher rates on average than banks and credit unions, but there are select online lenders, like Symple, that can offer low interest loans to people with strong finances.
- Online broker. An online broker such as Loans Canada or LoanConnect can help you quickly prequalify with multiple lenders to help you find the lowest rate you can get with its partner lenders.
What types of loans have low interest rates in Canada?
Personal loans with low interest include:
- Secured personal loans. Secured loans have lower interest rates than unsecured loans since they involve collateral, such as your house or investments, which lowers the risk for the lender. If you default on your loan, the lender can take your asset to make up for its losses. Secured personal loans are the most traditional way to take out a loan if you’re borrowing a large amount of money and/or looking to lower your interest rate.
- Home equity loans or lines of credit. Putting up your house as collateral can lower your interest rate. A home equity loan is the same as a secured personal loan with your house as collateral.
- Cosigned personal loans. If your credit score is not the best, a friend or family member with strong finances can cosign your loan and help get you a better rate. However, if you miss payments on your cosigned personal loan, your guarantor’s credit score will go down and they’ll be on the hook to make payments on your behalf.
Features of low interest loans in Canada
- Borrow $3,000 – $50,000 (can be more if your home is collateral). How much you’ll be approved for will depend on your finances.
- Repay in 6 - 60 months (can be longer if your home is collateral). Aim for the shortest loan term possible with payments you can still manage because the longer the loan term, the more you’ll pay in interest.
- Rates start from 5.4%. Your rate will depend on your personal situation. Learn more below.
What will get you approved for low interest rate loans?
Lenders look at many factors when reviewing your application. While you may not need to meet all of these to get the best loan rates in Canada, they will help:
1. Strong credit score
A credit score above 660 (or better yet, above 725) shows lenders that you have a history of making on-time bill and loan payments. The longer the history, the better.
If your credit score could use some improvement, you might want to wait at least six months before you apply for a cheap personal loan. Increase your credit score by paying down debts, paying bills on time and keeping your credit card balance low. You can also order a free copy of your credit report from one of the credit bureaus Equifax or TransUnion. If you see a discrepancy that’s bringing down your score, you can file a dispute to get it removed.
2. Stable employment
Stable employment shows lenders that you’ll have the income to make your loan payments. Lenders of low interest loans will want to see reliable income in the last three years. Salaried positions will be viewed as lower risk than short-term contract work. Who you work for also matters – an established company will be seen as lower risk than a company that’s only been around a few years.
3. Positive net worth
Your net worth is your assets minus your debts. If your assets are worth more than the debts you owe, you have a positive net worth, and it indicates that you have good saving habits. Also, if your assets can easily be changed to cash, this shows lenders you can handle financial emergencies, and it therefore lowers the risk for them.
4. Low debt-to-income ratio (DTI)
Your DTI is the percentage of monthly debt payments from your monthly income. You’re typically in the clear if your DTI is under 40%, but the lower the DTI, the better.
Collateral lowers the risk for the lender. Examples of collateral include home equity (your house’s appraised value minus your mortgage balance), savings accounts, life insurance policies with cash surrender value and investments (GICs, Canada Savings Bonds). Government-registered assets such as RRSPs and RRIFs cannot be accepted as collateral.
Some lenders will accept your car if it’s paid off, but using it as collateral will usually not get you the lowest rate because cars depreciate.
5. Few hard credit checks
Applying for too much credit in the last six months suggests that your financial situation has changed negatively. Unfortunately, there’s no definitive answer to how many hard credit checks is too many. If you’re looking for a low interest personal loan, check if the lenders you’re interested in offer personal loan pre-approval without affecting your credit score. This way, you can compare rates without worrying about your credit score going down.
What are the basic requirements of low interest loans?
Basic requirements for low interest loans include the following:
- Be at least 18 or 19 years old, depending on your province.
- Be a Canadian citizen or a permanent resident.
- Have an active bank account.
- Have a steady income.
Can you get a low interest personal loan if you're self-employed?
Yes. If you’re self-employed, you can still get a low rate personal loan from a bank, credit union or online lender. They can offer you low rates as long as you can demonstrate stable self-employment income in the last three years. You’ll need to provide financial documents such as your T1 General, balance sheet, income and expense statement and statement of retained earnings.
Other aspects of your finances will need to be strong as well if you want to get a low rate loan, such as your credit score and DTI.
Can you get a low interest personal loan in this environment?
Personal loan rates are higher now because the Bank of Canada increased its rate eight times from March 2022 to January 2023, which caused banks, credit unions and alternative lenders to also increase their rates. Unfortunately, you can’t get low interest loans at the same rates as those from 2021 or prior. But if your finances are strong, you can apply for the most competitive rates on the market today. You’ll just need to spend time comparing your options to find the best offer.
How to pick the best low interest loan in Canada
You can choose from many low interest personal loans when your finances are in shape. To find the best option for you, consider these steps:
Research personal loan rates in Canada
Become familiar with personal loan interest rates Canada from different places so you have a good idea of what rates you’ll encounter. Interest rates vary depending on the type of lender (bank vs credit union vs online lender), type of loan (secured vs unsecured), type of interest rate (fixed vs variable), loan term and loan amount.
Ask about the annual percentage rate (APR)
Make sure the lender breaks down the APR, which is your interest rate plus the fees you must pay to get the loan. It gives you a truer view of the cost of the loan and helps you compare multiple offers. If the loan doesn’t have financing fees, the APR is the same as the interest rate.
Look into relationship discounts
Your current bank might offer rate discounts to their chequing account customers.
Look into repayment flexibility
If there’s a chance you can pay off your loan early or make extra payments, look for a lender that doesn’t charge for this (often called a “prepayment penalty”). This is an uncommon fee for unsecured personal loans.
Paying off your loan early or making extra payments lets you save on interest. Federally regulated financial institutions such as banks and credit unions are legally required to let you do this without any penalties, unless the personal loan is secured by real estate.
Get clarity on principal vs interest
Before signing anything, examine the payment schedule. Check how much of your payments is going towards the principal vs interest. Are your initial payments reducing any of the principal, or are they all going towards the interest first? If you’re paying for the interest first, it doesn’t matter if you pay off your loan early – you’ll still pay the full amount of interest. Apply somewhere else if you find this to be the case.
Watch out for fees
Don’t focus solely on the interest rate. Find out if there are any extra charges to your low interest personal loan. Watch out for these charges:
- NSF fee. If there are insufficient funds in your bank account, your lender may charge an NSF fee between $25 and $50. This is separate from the NSF fee your bank will charge.
- Late fee. If you miss a payment due date, the lender may charge you a fixed dollar amount or a percentage of the outstanding balance (around 3-5%).
- Origination fee. This is included in the APR, and it’s a fee to administer your loan. It’s either added to or deducted from your loan amount. It’s 0.5-5% of the loan amount. Not all lenders charge origination fees.
- Loan protection plan. This is a completely optional product, and lenders cannot require you to get it in order to get approved for the loan. In the event of a death, illness or job loss, loan insurance will cover your repayments. If you decide to get this product, it’ll add to the cost of your loan.
Online lenders are generally faster than banks and credit unions because their process is 100% online. You can get your low rate loan within 24 to 48 hours. Banks and credit unions may take a few days to a few weeks depending on the collateral used, what date you come in for an interview, the loan underwriter and whether the lender needs any extra information from you.
Check the lender’s reputation and customer service
Not all lenders operate the same. Before you apply or sign on the dotted line, check whether people have left any positive or negative reviews about the lender. Observe how the lender conducts itself during the offer stage. Are they pressuring you to sign? Are they unclear about rates and fees and overall cost? Do they require you to get loan insurance? If so, consider another lender.
Think about other perks
A perk you can look into is a trial period. For example, with a Mogo personal loan, you can return the principal within 100 days and get the interest and fees you paid back – a unique perk. Another perk to consider is how easy it is to manage your loan. For example, can you sign up for an account where you can view your payment history, track your loan balance, track deadlines and make payments? Does the lender allow you to change the payment schedule? Can you skip or defer a payment?
Top picks for low interest personal loans in Canada
Banks and credit unions are a good place to start if you’re searching for loans with low interest, but if you’re interested in alternatives, here’s a look at our top picks:
Overview: LoanConnect is an online broker. Interest rate starts at 6.99% for secured loans and 6.99% for unsecured loans. You can search its lender network for free without affecting your credit score.
Eligibility requirements: Currents debts must total less than 60% of income
How to apply for a low interest loan
You can apply for cheap personal loans in Canada by following the steps below:
- Apply online or at a branch. Provide information such as your name, desired amount, reason for the loan, date of birth, address, phone number, email, job title, employer, monthly income and debts.
- Get a response. You should get a reply within one to two business days. If you’re pre-approved, use the quote to compare it with other lenders.
- Attend an interview. If you apply to a bank or credit union, they may require you to meet with them to discuss your loan needs and financial situation.
- Get approved. Getting approval can take one day to a few weeks depending on where you apply and whether your loan has collateral.
- Review your contract. Review the payment schedule and how much the loan will cost you overall. Sign when you’re ready.
- Get your money. Your money will be deposited directly into your account in one business day. Some lenders have an Interac e-Transfer option – in which case, you can get your money quickly on the same day.
What documents will you need to provide to get a low interest loan?
The lowest interest rate personal loans usually require more paperwork. While the lender may not ask for all of these, prepare the following documents in advance for a smoother, quicker process:
- Two pieces of ID
- Pay stubs (last two to three months)
- Employer letter
- T4 slips
- Notice of Assessment
- Income tax return (T1 General)
- List of assets and debts
How much do low interest loans in Canada cost?
The cost of a low interest personal depends on the loan amount, loan term and APR. As an example, let’s say an Ontario resident is offered a $10,000 loan over 3 and 5 years at 5.99%, 7.99%, 9.90% and 10.45% APR. Below is a cost breakdown:
|APR||Monthly payment over 3 years||Total cost over 3 years||Monthly payment over 5 years||Total cost over 5 years|
The cost difference between the shorter loan term and lowest rate vs the longer loan term and highest rate is $1,931.
Can you get cheap personal loans with bad credit?
Your credit score is the single most important factor that will determine your interest rate. Unfortunately, people with bad credit will have a difficult time getting a low interest personal loan. Lenders charge higher rates when you have bad credit because they’re taking on more risk to lend you money.
There are, however, a few ways to lower your rate as much as possible:
- Ask a guarantor to cosign your loan. If you have bad credit but have someone willing to act as a guarantor on your loan, you may get a more favourable interest rate. Just make sure your cosigner is aware of the responsibility they’re taking on.
- Secure your loan. If you’re willing to secure your personal loan with an asset such as your car or house, your lender may lower your interest rate since you’re reducing the risk for them.
- Improve your credit score first. This may not be an option if your need is urgent, but if you can wait at least six months, try to rebuild your credit score. Stay on top of your monthly payments, avoid any late or missed payments and make sure you use less than 30% of your credit card limit. This will make a world of difference before you make your case to lenders to borrow more money.
- Compare options before applying. While you may think your options are limited, you should still comparison shop before deciding on the best bad credit loan for you. You may find varying interest rates or disparities in charges and fees between bad credit lenders in Canada.
Can you get a low interest personal loan with no credit check?
No. Credit checks are a standard practice for most lenders in Canada, and it’s a way for them to determine how risky you are as a borrower. Loans with no credit check will always have higher interest rates because lenders will assume you have a bad credit history.
What can you use low interest loans in Canada for?
There are generally no restrictions on how you use your personal loan unless you specifically apply to consolidate debt. Some lenders may also not allow you to use the personal loan for business purposes, but other than that, you can use your low rate personal loan for whatever you need. According to a Finder survey about inflation and debt, Canadians took out a loan in 2022 for the following reasons:
- To cover bills
- To consolidate debt
- To cover bills due to job loss
- To buy a car
- To pay for education
- To renovate home
Can you apply for a low interest personal loan to consolidate debt?
If you have good to excellent credit and currently have multiple debts with high interest rates (for example, credit cards), it might make sense to get a low interest loan to consolidate debt. Consolidating your debts simplifies your payment schedule because rather than making multiple payments per month to different creditors, you make one payment to your consolidation lender. A debt consolidation loan also saves you on interest if you manage to get a lower rate.
Debt consolidation loans may not save you interest
It’s important to note that the opposite could happen too – that a debt consolidation loan may end up costing you more overall. This is because consolidating debt signals to the lender that you might have taken on more debt that you can handle, which means you could be a riskier borrower. If they deem you a riskier borrower, they may not be willing to offer you a better rate than what you currently have. However, they may be able to lower your monthly payments (at a higher rate). This means you’ll pay more interest overall, but you’ll have more breathing room in your monthly budget. Learn more about the best debt consolidation loans in Canada.
Can you get an interest-free loan?
You can’t get an interest-free personal loan. This is because lenders do not have an incentive to lend you money if they can’t earn money (i.e. interest) from it. There is such a thing as 0% financing, but this type of financing is for specific purchases, such as cars, furniture and electronics. Learn more about stores that offer 0% financing.
Pros and cons of cheap personal loans
If you’re thinking of taking out a low interest personal loan, here’s a look at some of the pros:
- Save money. You’ll save money on interest payments with a lower rate, which means you’ll have more money to pay off your loan or buy whatever you want.
- Easy process. With the rise of online loans in the past several years, it can take less than 10 minutes to apply for a low rate personal loan. You can start by applying online, and then you can keep track of the loan online as well. If you prefer to apply in person at a branch, find a lender that has a location near you.
- Rebuild your credit. If you have less-than-perfect credit, a personal loan can rebuild your credit score as long as you stay committed to making your repayments on time.
Low interest personal loans also come with some downsides to be wary of:
- Difficult to qualify. You may have difficulty getting low interest rates unless you have a high credit score or are willing to put up an asset to secure your loan.
- Advertised rates don’t always pan out. Many of the lowest rates you see advertised online are reserved for borrowers with high income, low debts and strong credit scores.
- Scams are prevalent. If you find very low rates online that seem too good to be true, you may have reason to be suspicious and should do more research before handing over your personal information.
- Adding more debt to your name. If your goal is to be debt-free, a personal loan may dig you deeper into the red.
Low interest personal loans can help you save money and repay your loan faster. The main downside is that they’re reserved for borrowers with strong credit or assets to borrow against. Before signing up for a low interest loan, be sure to compare offers from multiple lenders.
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