Interest isn’t the only factor that contributes to your loan cost—loan fees can also add up quickly. No fee loans help you avoid extra charges that make your loan more expensive. Learn how to apply for no upfront fee loans, and compare no fee lenders to find the best loan for your needs.
Must read: Avoid loans with upfront fees before getting your loan
There are two types of upfront fees you should watch out for:
Legitimate upfront fees. Some lenders include origination fees in your total loan amount, which can add significantly to your overall cost. This fee can be a percentage or a fixed dollar amount and is either deducted from or added to your loan amount.
Illegitimate upfront fees. Fraudsters posing as lenders may attempt to charge you upfront fees before you receive your loan. To avoid getting scammed, steer clear of all lenders that require a fee for loan insurance, a loan deposit or any other advance payment. Legitimate lenders will not charge you fees before you get funds.
Are there no upfront fee loans?
Yes, you can find no upfront fee loans with many lenders, including several major financial institutions (such as TD and ATB). With these loans, all you’ll be expected to pay is the interest rate. There are no upfront fees like origination, set-up or admin fees.
That said, you may not be safe from all fees no matter which loan you pick. For example, if you miss a payment or have insufficient funds in your bank account, you will typically be charged a late payment fee and/or NSF fee with most lenders, even with no fee loans.
Compare no fee loans
Compare lenders and brokers that charge no upfront fees. If you apply to a broker (Loans Canada or LoanConnect), you can be matched with lenders for free, but some may charge admin or origination fees.
What is an origination, administration or set-up fee?
A lender may charge origination, administration or set-up fees at the beginning of the loan process to cover the expenses they incur when processing your loan. These fees can cover costs such as credit checks, appraisals and other underwriting expenses.
Origination, administration and set-up fees are usually a percentage of your loan amount, but they can also be a fixed dollar amount. A standard fee may be anywhere from 0.5–5% of your total loan amount, or a few hundred dollars, depending on your loan amount. Some loans (for example, mortgages) will have higher fees due to the complexity of the loan process.
Representative example: $10,000 loan with and without an origination fee
The below table compares a $10,000 loan over 5 years, with and without fees. The interest rate is the same for both examples. The fee for loan 1 is deducted from the total loan amount, so the borrower only gets $9,700. With the no fee loan, the borrower gets the full $10,000.
Loan 1 (with fees)
Loan 2 (no fees)
Loan amount
$10,000
$10,000
Interest rate
8%
8%
Loan term
5 years
5 years
Additional fees
Origination fee of 3% ($300)
$0
Monthly payment
$202.76
$202.76
Total loan cost
$12,165.84
$12,165.84
Funds actually received
$9,700 (-$300 in fees)
$10,000
Real APR
9.3%
8%
*The information in this example, including rates, fees and terms, is provided as a representative transaction. The actual cost of the product may vary depending on the retailer, the product specs and other factors.
Interest rate vs APR: What’s the difference?
The difference between your interest rate and annual percentage rate (APR) has to do with the fees you pay. With no upfront fee loans, your APR and interest rate will be the same. With loans that charge fees, your loan’s interest rate will usually be lower than its APR.
Interest rates. Your interest rate is the cost of borrowing money, expressed as a percentage of your principal loan amount. You may pay a fixed interest rate that doesn’t change over time or variable interest that goes up and down as the Bank of Canada prime rate changes. You could also pay simple, flat or compound interest, depending on your lender.
APR. APR is a more comprehensive measure of the cost of borrowing than the interest rate alone. It reflects the interest rate and loan fees, so you can understand the true cost of your loan. Fees you might see included in the APR include origination fees and closing costs.
Different types of interest
Simple interest: This interest is charged as a percentage of the principal loan amount, without prior interest charges. As you pay the loan down, your interest goes down.
Compound interest: Compound interest is also charged as a percentage of your principal. But it’s calculated based on the balance you owe plus accumulated interest. For no fee loans or any other type of credit, compound interest is more costly over time than simple interest.
How do you get a no fee loan fast?
While it’s difficult to get an instant decision on a no fee loan, there are a few ways you can speed up the approval process.
Apply online. Online lenders can typically offer no upfront fee loans much faster than traditional banks or credit unions. Compare no fee lenders above to find a lender that may be a good fit for you.
Use instant bank verification. Find a reputable lender that lets you sign into your bank account to validate your personal information. This will let you sign up without needing to upload personal documents such as bank statements or your driver’s licence.
Prepare your documents in advance. Gather personal ID, proof of income and proof of residency before starting your application. Acceptable documents might include government-issued ID, tax records, pay stubs, bank statements, employment letters and your Social Insurance Number.
You may be able to get bad credit loans with no fee, but they will usually come with very high interest rates. Make sure you compare APRs for various loans to get the best deal. You should also verify that the loan fits your budget, and avoid taking out a loan unless you’re certain you can pay it back on time. Otherwise, your credit score could go down even more.
How do I know a lender will accept bad credit?
You just need to check the lender’s eligibility criteria to see what their requirements are. Most lenders will advertise on their website that they cater to clients with bad credit. You can also apply with a personal loan broker to figure out which lenders you’re eligible to work with, without having to manually compare your options.
It depends on the lender. The majority of personal loan lenders will conduct a credit check. The ones that don’t will usually expect you to have a high income or regular full-time employment. In any case, you should always be wary of lenders that offer to lend you money without a credit check, since it could indicate that they’re running a scam.
What credit score is needed for no upfront fee loans?
You’ll usually need a credit score of 660 or above to qualify for most no upfront fee loans. Any score below 660 will be considered as fair or bad credit, and with this score, you’re more likely to encounter lenders that charge origination or admin fees. You can apply to find out your credit score from one of Canada’s major credit bureaus, such as Equifax or TransUnion.
Can you get an unsecured loan with no fees?
Yes, some online lenders offer unsecured loans with no fees. This is especially true if you have good or excellent credit or a high income, or the lender uses an automated process to reduce their overhead costs.
Usually, the upfront fees you’ll pay with unsecured loans would be for an agent to process your loan application. You might also pay other fees after you get your loan, such as prepayment fees, non-sufficient funds fees or late payment fees.
Can you get a secured loan with no fees?
It’s not usually possible to get secured loans with no fees because it takes more time and energy for lenders to process these types of loans. They may ask you to pay origination fees to set up your loan or appraisal fees to figure out how much your collateral is worth.
Ask your lender directly about fees for secured loans, and make sure you read your loan terms carefully to figure out what you have to pay.
Do you need a guarantor for no fee loans?
Not usually. It will be up to the lender if you require a guarantor, but this will usually be based on your creditworthiness. You may also decide to sign on with a guarantor if your credit score is low or you don’t have much credit.
Signing on with someone who has good credit can help you get better interest rates than you would otherwise. The only caveat is that your guarantor will have to agree to be on the hook to pay back your loan if you default.
Steps to get a no fee loan
Follow the steps below to find the right no fee loan in Canada:
Apply for pre-approval.Apply for personal pre-approval with several no fee online lenders. Simply provide personal details such as your contact details, job, income and housing information to get the ball rolling.
Pick the best personal loan. Sort through the loan offers you get back and choose the best fit for your personal needs and budget. Think about loan features such as interest rates, loan amount, term and repayment requirements. Learn more about the best personal loans in Canada.
Submit a formal application. Once you settle on an offer, you may need to submit a more comprehensive application with the lender you choose. You’ll usually need to upload or submit loan documents and banking information at this point.
Consent to a credit check. You’ll almost always be required to submit to a credit check with no upfront fee loans in Canada. This is because your lender will use your credit score to decide what interest rates you should pay.
Get a final loan offer. Review your loan agreement carefully. Make sure you fully understand the terms and cost of your loan, and keep an eye out for hidden fees.
Sign and submit. Sign and submit your loan agreement if you’re happy with your contract. With a personal loan or line of credit, you’ll usually get your money via e-Transfer or direct deposit.
What eligibility criteria do I need to meet for a no fee loan?
To qualify for a no upfront fee loan in Canada, you’ll need to meet the following criteria:
Be a Canadian citizen or a permanent resident
Be at least the age majority in your province or territory (18 or 19 years old)
Have a steady income, preferably from full-time employment
Meet credit score requirements, which vary from lender to lender
Not currently in bankruptcy or a consumer proposal
Required documents
To apply for no fee loans in Canada, you may need the following documents:
Identification. Government-issued ID like your passport or driver’s license. Some lenders also require your Social Insurance Number.
Proof of income and employment. Recent pay stubs, employment records, bank statements or tax Notices of Assessment.
Debt-to-asset ratio. Lists of assets and debts to make sure you qualify for funding.
Asset appraisal for secured loans. Documentation that verifies the market value of your asset and the size of your equity.
What kind of fees should I watch out for?
Watch out for the following fees when assessing different loans to make sure you don’t overpay:
Origination/administration fee. An origination fee is typically 0.5% to 5% of your loan amount, and your lender charges it upfront to process your loan.
NSF fee. Expect to pay $25–$50 for NSF fees. This is in addition to the NSF fee your bank charges for insufficient funds.
Late fee. Not all lenders charge late fees, but some do. You’ll usually pay a fixed dollar amount around $25–$50, or around 3–5% of the unpaid payment.
Loan insurance. It’s common for lenders to offer optional loan insurance, which may account for 1–5% of your loan amount.
Prepayment penalty. This is a fee to pay your loan off early. Most lenders won’t charge this fee unless your loan is secured by an asset.
Frequently asked questions
You can ask your lender directly to find out if your loan comes with fees. It's also a good idea to carefully read your loan contract before you sign to make sure there aren't any fees hidden in the fine print. You'll also want to compare your APR to your interest rate. If there's a variation, then your loan likely comes with fees.
Payday loans come with no upfront fees, but lenders will take out the borrowing fee on the day you repay. This fee can be anywhere from $14 to $17 for every $100 you borrow, based on which province you live in. You may pay even more in the territories. You'll also pay late fees on payday loans if you don't pay your loan back by the due date.
It's likely that short term loans will have some sort of fee. This should be specified in your loan contract. Make sure to look at the APR of the loan rather than the interest rate by itself when you compare loans to get a true idea of how much you'll pay with fees included.
You may be able to qualify for bad credit loans with no fee. Just be prepared to pay very high interest rates. You may also need to prove you have a reasonable debt-to-income ratio and regular full-time employment to compensate for your low credit score.
Personal loan providers in Canada usually don't offer 0% loans, but you can get a low interest loan if you have a strong financial profile. If you only need a small amount, some cash advance apps like Bree and Nyble offer 0% interest loans of up to $250 and $150 respectively (subscription fees and other charges may apply).
Claire Horwood is a writer at Finder, specializing in credit cards, loans and other financial products. She has a Bachelor of Arts in Gender Studies from the University of Victoria, and an Associate’s Degree in Science from Camosun College. Much of Claire’s coursework has focused on writing and statistics, with a healthy dose of social and cultural analysis mixed in for good measure. In her spare time, Claire enjoys rock climbing, travelling and drinking inordinate amounts of coffee.
Learn about the differences between personal loans and lines of credit to decide which one suits your borrowing needs.
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