Struggling to qualify for bank financing? Not to worry. There are plenty of reputable non-bank lenders in Canada that can help you get the money you need. Whether you’re applying for a mortgage, loan or non-bank line of credit, many alternative lenders offer flexible financing and solid customer service. Just watch out for higher fees and interest rates with some lenders.
What are non-bank lenders in Canada?
Non-bank lenders in Canada consist of online lenders and credit unions:
- Online lenders. Online lenders are financial companies that operate without a banking licence in Canada. They usually operate completely online.
- Credit unions. Credit unions are member-owned and not-for-profit financial institutions rather than corporately owned and for-profit banks.
Benefits that non-bank lenders can offer over banks
When you opt for an alternative lending solution, you gain access to certain features and benefits, including the following:
- Innovative lending solutions. Independent lenders can sometimes offer innovations that banks cannot – like online application, approval and funding and much faster turnaround times.
- Bigger savings for customers. Some lenders, such as credit unions, are not run for profit, which means customers of the credit union are considered shareholders. Any profits are put back into the products, which translates into future savings for customers.
- Personal customer service. Many credit unions have histories rooted in local communities and organizations that can offer a level of personal customer service that’s not always possible for larger financial institutions.
Are non-bank lenders safe?
There are many safe and legitimate non-bank lenders in Canada. All credit unions will be just as safe as banks as long as they’re licenced in Canada. It can be more difficult to tell if an online lender is safe.
Your best bet is to check customer reviews and look for a lender with a good reputation and solid online presence. Avoid lenders that offer guaranteed loans, contact you out of the blue or try to charge fees upfront before you receive your money.
Compare non-bank personal loans in Canada
What are non-bank personal loans?
Non-bank personal loans are offered by online lenders or credit unions, but they are very similar to what you might find with the bank.
- How it works. You borrow a lump sum of money and pay interest on the full amount. You may be able to borrow upwards of $50,000, and you’ll typically repay your loan over a term of 6 to 60 months.
- What you can use it for. You can use the funds you borrow for any purpose, including home renovations, debt consolidation, making a large purchase or funding a life event such as a wedding or anniversary.
- What types of loans are available? It’s possible to get unsecured loans and secured loans from non-bank lenders in Canada. These may come with fixed or variable rates, based on your preference. Some lenders also allow a cosigner for your personal loan to help you get approved.
How are non-bank online loans different from bank loans?
Non-bank personal loans you can get online are usually easier to qualify for than bank loans, which makes them particularly attractive for people with bad credit. It’s also more convenient to apply, and you’ll get the money faster than you would with the bank.
The major downside of non-bank personal loans is that they can come with high fees and interest rates. It can also be more nerve-wracking to borrow money from an online lender, rather than a bank you know and trust. If this is an issue for you, you may want to apply with a credit union if your credit score is above 660.
Personal loans from non-bank lenders vs banks
The table below shows how non-bank lenders compare to banks for personal loans.
|Feature||Online lender||Credit union||Bank|
|Rates||Mostly fixed||Fixed or variable||Fixed or variable|
|Loan amounts||$500 to $50,000||$3,000 to $50,000 or more||$3,000 to $50,000 or more|
|Loan terms||6 to 60 months (can be longer for loans secured by your home)||6 to 60 months (can be longer for loans secured by your home)||6 to 60 months (can be longer for loans secured by your home)|
|Loan types||Secured and unsecured||Secured and unsecured||Secured and unsecured|
|Application||100% online||In person (may require an interview with a loan specialist)||In person (may require an interview with a loan specialist)|
|Eligibility requirements||More lenient than banks and credit unions – people with bad credit can apply||As strict as banks – requires a good to excellent credit score||Strict – requires a good to excellent credit score|
Eligibility requirements of non-bank personal loans
Compare the lending requirements of credit unions and non-bank lenders in Canada for personal loans:
|Credit unions||Non-bank online lenders in Canada|
Compare non-bank lines of credit in Canada
What is a non-bank line of credit?
A non-bank line of credit is offered by online lenders or credit unions, but it is very similar to what you might find with the bank.
- How it works. A non-bank line of credit is a rotating pool of funds you can borrow from, but you’ll only pay interest on the money you take out (not the amount you qualify for). As you pay your line of credit back, you can borrow from the pool of funds again.
- What you can use it for. Much like personal loans, you can use a non-bank line of credit for anything you want. You may be able to qualify for up to $50,000 with some lenders.
- What types of loans are available? You can get an unsecured non-bank line of credit, a secured line of credit with your investments as collateral or a home equity line of credit (also known as a HELOC, which uses the equity in your home as collateral).
How are non-bank lines of credit different from a bank line of credit?
A line of credit from a non-bank online lender comes with less strict eligibility requirements, and you can apply for it online. You’ll usually get approved faster than you would with the bank. That said, it can be more cumbersome to manage a line of credit with an online lender since it won’t be connected to your primary bank account. Online lenders may also charge very high rates and fees, especially if you have bad credit.
Credit union lines of credit are harder to get and have lower rates, similar to banks.
Eligibility requirements of non-bank lines of credit
Compare the typical lending requirements to qualify for a credit union versus an online line of credit.
|Credit union lines of credit||Non-bank lines of credit|
Compare non-bank mortgage lenders in Canada
What are non-bank mortgages in Canada?
This type of mortgage is provided by alternative non-bank mortgage lenders in Canada.
- How it works. Borrow a lump sum to fund your new property or borrow against the equity in your existing home to pay for other expenses.
- What you can use it for. You can only use mortgages to pay for the costs of your home. Other types of mortgage financing, which you would get by tapping into your equity, can be used for anything you want in most cases.
- What types of mortgages are available? New mortgages, second mortgages, mortgage refinancing, self-employed mortgages and more.
How are non-bank mortgages different from bank mortgages?
Non-bank mortgages can be slightly easier to qualify for than bank mortgages. They’re also much more convenient since you can apply completely online. The major downside of non-bank mortgage lenders is that they can come with high fees and interest rates.
You’ll need to do some research to ensure the lender you want to borrow from is reputable.
Eligibility requirements of non-bank mortgage lenders
Compare the lending requirements of credit unions and non-bank mortgage lenders in Canada.
|Credit unions||Non-bank mortgage lenders in Canada|
How should I compare non-bank lender financing?
Compare the following factors to find the best non-bank financing in Canada.
- Interest rates. Compare at least three to four lenders to get a range of suitable offers. Secure your loan with an asset or get a cosigner to lock in the best rates or increase your chances of approval.
- Loan amounts. Amounts will vary based on loan type. Unsecured personal loans or lines of credit usually cap out around $50,000. You’ll qualify for more with a mortgage.
- Turnaround time. Credit unions may take a few days or weeks to finance you. Most online lenders can get you money in under 48 hours in most cases.
- Loan term. Lenders vary in the loan terms they offer. A longer loan term means you’ll pay more in interest.
- Fees. Some lenders charge admin fees, NSF fees, late fees and early repayment fees. Read your contract carefully to make sure you know what the lender will charge you.
- Company reputation. Search for a lender that has solid reviews and seems legitimate. Check online reviews on sites like Google, Trustpilot and the Better Business Bureau.
How do I apply with non-bank lenders in Canada?
Follow the steps below to apply for non-bank financing in Canada:
- Apply for pre-approval. Fill out an application to apply for pre-approval with several online lenders or credit unions. Provide personal details such as your contact details, job, income and housing information.
- Pick the best loan. Compare the pre-approval offers you get back and choose the one with the lowest rates and the best terms for your situation (consider details such as interest rate, loan amount, length of term, fees, repayment requirements, etc).
- Submit a formal application. The lender you decide to go with may need you to submit a more detailed application to formally apply for a loan (on top of pre-approval). You’ll typically need to upload or submit loan documents and banking information at this point.
- Submit to a credit check. You will need to consent to a credit check with some lenders. A hard credit check can affect your credit score, while a soft check will have no impact on your score.
- Get a final loan offer. Review your loan agreement. Understand your payment schedule and how much the loan will cost you overall. Keep an eye out for extra fees.
- Sign and submit. If you’re happy with the terms of your financing, sign and submit your loan agreement. With a personal loan or line of credit, you’ll usually get your money via Interac e-Transfer or direct deposit.
What documents do I need?
To apply for financing with non-bank lenders in Canada, you may need to provide the following documents:
- Identity documents. Government-issued ID such as your passport or driver’s licence.
- Proof of income and employment. Bank statements, pay stubs, tax records, proof of government benefits (such as EI) or letter of employment.
- Debt-to-asset ratio. Lists of assets and debts to make sure you can qualify for funding.
- Social Insurance Number. You may also need to input your SIN so your lender can check your credit.
If you opt for instant bank verification, you won’t need to submit all of these. Learn more about bank verification for loans.
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