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No fee loans in Canada
Pay only interest and save money on fees with a no fee loan.
Interest isn’t the only factor that contributes to your loan cost – loan fees can also add up quickly. Fees can make your loan much more expensive than expected and should be avoided whenever possible. Learn more about 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 charge origination fees that are baked into your total loan amount. These fees can be a percentage of the loan amount or a fixed dollar amount, and they can add significantly to your loan cost. It’s 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 ask you to pay a fee to cover loan insurance, a loan deposit or any other type of advance payment. Legitimate lenders will not charge you any fees before you get your money.
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. You’ll be exempt from upfront fees such as 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’ll see your lender matches for free, but some may charge an admin or origination fee.
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 an origination fee vs 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 amount of the loan received. This means that the borrower will only receive $9,700 when the loan is paid out vs the full $10,000 paid out for the no fee loan.
|Loan 1 (with fees)||Loan 2 (no fees)|
|Loan term||5 years||5 years|
|Additional fees||Origination fee of 3% ($300)||$0|
|Total loan cost||$12,165.84||$12,165.84|
|Funds actually received||$9,700 (-$300 in fees)||$10,000|
*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 fluctuate over time or variable interest that goes up and down in line with the prime rate of Canada. 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 your interest rates alone. It takes into account the interest rates and fees you’ll pay so you can understand the true cost of your loan. Fees you’ll typically see as part of your APR may include origination fees and closing costs.
Different types of interest
- Simple interest: This interest is charged as a percentage of your loan’s principal only. It will reduce over time as you pay down your loan. It doesn’t factor accumulated interest into your balance.
- Compound interest: Much like simple interest, compound interest is charged as a percentage of your principal. The main difference is that your lender will also add accumulated interest from previous periods to your balance, and you’ll pay interest based on that amount.
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 in the table 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 documents to prove your identity and income before you start your application. These include government-issued ID, tax records, pay stubs, bank statements, employment letters and your Social Insurance Number, among other documents.
Can you get bad credit loans with no fee?
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.
Can you get no fee loans without a credit check?
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.
- Submit 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 who is at least 18 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
To apply for no fee loans in Canada, you may need the following documents:
- Identity documents. Government-issued ID such as your passport or driver’s licence. Some lenders also require you to provide your Social Insurance Number.
- Proof of income and employment. Pay stubs, employment records, bank statements or tax documents.
- Debt-to-asset ratio. Lists of assets and debts to make sure you can qualify for funding.
- Asset appraisal for secured loans. Documentation that verifies the market value of your asset, and how much equity you have in it.
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 loan insurance, which may account for 1–5% of your loan amount. This product is optional.
- 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 your home.
Frequently asked questions
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