Applying for low interest loans in Canada can save you a lot of money over time as more money goes towards the principle. That’s why it’s always worth comparing your options to make sure you’re getting the best rates for you. In most cases, you’ll need to have a good to excellent credit score to qualify for the lowest personal loan rates.
Keep reading to compare low interest personal loan options from Canadian banks, credit unions and online financial institutions in our curated list below.
Browse personal loans with low interest from a range of lenders.
| Loan provider | Interest rates | Loan amount | Loan term | Eligibility requirements | |
|---|---|---|---|---|---|
 | 12.99% - 31.99% | $2,000 – $30,000 | 24 - 60 months | Min. income $5,000/month, 6+ months employed, min. credit score 700 | |
 | 9.99% - 46.96% | $500 – $35,000 | 9 - 84 months | Min. income of $2,000 /month, 3+ months employed, 550 min. credit score | |
 | 6.99% - 46.96% | $300 – $50,000 | 3 - 60 months | Steady income | |
 | 8.99% – 46.96% | $500 – $60,000 | 3 - 120 months | Steady income | |
 | 12.99% - 39.99% | $500–$10,000 | 9 - 36 months | Min. income of $1,666.67 and min. 575 credit score | |
 | 9.90% - 46.96% | $500 – $35,000 | 6 - 60 months | Min. income of $35,000 /year, min. 600 credit score | |
 | 8.99% - 34.99% | $500 – $60,000 | 36 or 60 months | Recommended income of $35,000/year, min. credit score of 600 | |
 | Fixed rate, unsecured: 12% - 16% | Undisclosed | 1 - 5 years | Credit score typically of 650 or above | Read review |
 | Fixed rate, unsecured: 5.39% - 9.13% | Undisclosed | Up to 5 years | Credit score typically of 650 or above | Read review |
 | Special offer: 10.99% (fixed) or 11.45% (variable). Valid until July 31, 2024. | $5,000 – $50,000 | 6 months - 7 years | Stable income, credit score over 680, Vancity membership | |
 | 7.20% - 14.20% | Varies | 1 - 5 years | Submit income and employment details | |
 | 8.74% - 9.74% | Varies | Not disclosed | Minimum income of $15,000/year and credit score over 680 | Learn more |
 (Windsor Family Credit Union) | From 7.99% | Varies | 12 - 60 months | Stable income, 625+ credit score, WFCU membership, DTI ratio of 50% or less | Learn more |
| Special offer: 7.99% for home improvement loans. Limited time offer. | Up to $25,000 | 5 years | Stable income, home equity, credit score over 680, Kawartha membership | Learn more |
What’s considered a low interest loan? Based on the latest information available from the Bank of Canada, the average interest rate for personal loans is 9.09%. 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 seven times in 2022 and three times in 2023, which increased personal loan rates in Canada. So far in 2024, the Bank of Canada has lowered its rate in the latest announcements.
Personal loan rates will depend on your situationAn unsecured personal loan with low interest will usually have a rate today that sits between 9.75% and 12% 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 close to banks’ prime rate, which is 6.70%. But keep in mind that very few people can qualify for the lowest rates.
It’s difficult to get the lowest advertised rate from any lender because it is usually reserved for “ideal” borrowers. This includes those with high incomes, multiple assets and little debt.
While it still pays to apply for a favourable advertised rate, be prepared for rate adjustments once all of your personal variables have been factored in.
If you have a strong financial profile, the best loan rates in Canada will be close to the banks’ prime rate of 6.70%. You’ll need to use your house as collateral if you want access to the best loan rates available.
The Big Five Bank with the lowest interest rate on a personal loan in Canada is Scotiabank with an interest rate of 5.39% - 9.13% for a fixed rate, unsecured loan. In order to qualify for the lowest APRs from this or other banks, you’ll need to have an excellent credit score and solid financial profile.
The following types of lenders offer low interest loans for good to excellent credit:
Plans to get a personal loan in CanadaData from the 2023 Finder: Consumer Sentiment Survey shows that 20% of respondents plan to take out a personal loan in the next three months.
Personal loans with low interest include:
Lenders look at many factors when reviewing an application for low interest loans. While you may not need to meet all of these to get the best loan rates in Canada, they will help:
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.
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.
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.
Your DTI is the percentage of monthly debt payments from your monthly income. You’re typically in the clear if your DTI doesn’t exceed 36%, but the lower the DTI, the better.
Collateral lowers the risk for the lender, which translates to lower rates for you. Examples of collateral include home equity (your house’s appraised value minus your mortgage balance), savings accounts, life insurance policies with cash surrender value or investments (GICs, Canada Savings Bonds).
Note that government-registered assets, like RRSPs and RRIFs, cannot be used as collateral. And while some lenders will accept your paid off vehicle as collateral, that may not help you get the lowest rate because your car depreciates.
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.
Basic requirements for low interest loans include the following:
You can apply for cheap personal loans in Canada by following the steps below:
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:
How to get the best low interest loan in CanadaYou can choose from many low interest personal loans when your finances are in shape. To find the best option for you, consider these steps:
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.
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.
If you have a long-standing relationship with your bank, you may have better luck applying for a low interest personal loan from there. Your bank might offer rate discounts or promotional interest rates to their current customers.
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.
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.
Don’t focus solely on the interest rate. Any extra charges on your low interest loan will add to the overall cost, and could offset the savings from a lower rate. Watch out for these charges:
Online lenders generally offer faster funding times 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, the date you come in for an interview, the loan underwriter and whether the lender needs any extra information from you.
Not all lenders operate the same way. Before you apply, see if there are any positive or negative customers reviews. 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.
Some low interest loans come with other perks beyond the rate. 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 back the interest and fees you paid.
Another perk to consider is how easy it is to manage your loan. Can you sign up for an account to 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?
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 6.99%, 8.99%, 10.90%, 11.45% and 12.99% APR. Below is a cost breakdown:
| APR | Monthly payment (3 year term) | Total cost (3 year term) | Monthly payment (5 year term) | Total cost (5 year term) |
|---|---|---|---|---|
| 6.99% | $309 | $11,114 | $198 | $11,878 |
| 8.99% | $318 | $11,279 | $208 | $12,452 |
| 10.90% | $327 | $11,769 | $217 | $13,016 |
| 11.45% | $330 | $11,863 | $220 | $13,181 |
| 12.99% | $337 | $12,130 | $228 | $13,652 |
The cost difference between the shorter loan term and lowest rate vs the longer loan term and highest rate is $2,538.
Unfortunately, people with bad credit will have a difficult time getting a low interest personal loan. Your credit score is the single most important factor that will determine your interest rate. Lenders charge higher rates for bad credit because they’re taking on more risk to lend you money.
There are, however, here are a few ways to lower your rate as much as possible if you have bad credit:
No. While loans with no credit check are available from some lenders in Canada, these loans will always come with higher interest rates because lenders will assume you have a bad credit history. In general, most lenders will want to run a credit check to help them to determine how risky you are as a borrower.
If you’re thinking of taking out a low interest personal loan, here’s a look at some of the pros:
Low interest personal loans also come with some downsides to be wary of:
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 can also saves you on interest if you manage to get a lower rate.
It’s important to note that the opposite could happen too. A debt consolidation loan might 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.
The results of the Finder: Consumer Sentiment Survey Q2 were collected through an online Pollfish survey conducted between April 27 and April 29, 2023. In the survey, 1,011 Canadians from across the country were asked about their past use and current plans to use personal loans and other forms of credit. The estimated margin of error for the survey is +/- 3%, 19 out of 20 times.
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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