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Variable-rate personal loans

Variable-rate loans could give you flexibility to help pay off your debt faster — but with the risk of higher costs down the road.

Variable-rate personal loans tend to come with lower starting annual percentage rates (APRs) than their fixed-rate counterparts. But as its name suggests, the interest rate can vary — or change — throughout the term of the loan depending on market conditions. Read on to learn more about how variable-rate loans work, what the benefits are and what you’ll want to watch out for.

How does a variable-rate loan work?

With a variable-rate loan, the interest rate you’ll pay will be based on a specified percentage plus or minus the prime rate. The prime rate is usually based on the Bank of Canada’s overnight lending rate and can fluctuate up or down based on economic conditions.

A variable rate can change over the course of your loan term, and usually starts out cheaper than a fixed interest rate, but it can potentially increase and be more costly a few years into your loan term. With a variable rate, your monthly payments will vary if the prime rate fluctuates.

Banks and credit unions are the main providers of variable-rate loans. As an example, the rate of TD’s variable-rate personal loan is 6.33% – 13.58%, while the rate of its fixed-rate personal loan is 8.83% – 16.03%.

Term length and loan amounts of variable-rate personal loans

Term lengths for variable-rate loans usually sit between 1 and 5 years, with some lenders offering terms up to 7 or 10 years.

Borrowing amounts typically range anywhere from $3,000 to $50,000, sometimes more. Depending on the lender, you may be able to make extra repayments or pay off the entire loan early without facing penalties.

A variable-rate personal loan can be either secured or unsecured. With a secured loan, you’ll need to provide collateral such as your home or investments.

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Finder does not currently have any variable-rate loans. You may like to consider these fixed-rate personal loans instead.

Name Product Interest Rate Loan Amount Loan Term Requirements Credit Score Link
LoanConnect Personal Loan
Secured from 1.90%, Unsecured from 5.75%-46.96%
$500 - $50,000
3 - 120 months
Currents debts must total less than 60% of income
Min. credit score: 300
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An online broker who helps inform clients towards better finances. Get pre-approved by different lenders for unsecured or secured loans in 5 minutes with any credit score.
goPeer Personal Loan
8.00% - 31.00%
$1,000 - $25,000
36 - 60 months
Recommended income of $40,000 /year
Min. credit score: 600
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Canada's first regulated consumer peer-to-peer lending platform offering unsecured loans. Connects creditworthy Canadians looking for a loan with Canadians looking to invest. goPeer strives to offer the most competitive interest rates. Apply in minutes and get a response within 24 hours.
Spring Financial Personal Loan
17.99% - 46.96%
$500 - $15,000
9 - 48 months
Min. income of $1,800 /month, 3+ months employed
Min. credit score: 400
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An online lender offering unsecured personal loans and credit builder loans. Those filing for bankruptcy or a consumer proposal can also apply. If you're not eligible for an unsecured loan, you may be offered a loan to help rebuild your credit.
ConsumerCapital Personal Loan
19.99% - 34.99%
$1,500 - $12,500
24 - 60 months
Min. income of $1,900 /month, 6+ months employed
Min. credit score: 600
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An online lender that provides fast unsecured personal loans. Complete an application in less than 10 minutes and get a decision within 24 hours. For faster loan approval, complete the Flinks bank integration in the app.
SkyCap Financial Personal Loan
12.99% - 39.99%
$500 - $10,000
9 - 36 months
Min. income of $1,200 /month, stable employment
Min. credit score: 550
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An online lender offering unsecured personal loans to borrowers with a wide range of credit scores. Apply in less than 5 minutes and if approved, receive financing in as little as 24 hours.
FlexMoney Personal Loan
18.90% - 46.93%
$500 - $15,000
6 - 60 months
Min. income of $2,000 /month, 3+ months employed
Min. credit score: 500
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An online lender offering flexible unsecured loans. Apply in less than 10 minutes and if approved, receive financing in as little as 24 hours. Pay off your loan at any time.
Loans Canada Personal Loan
Secured from 2.00%, Unsecured from 8.00% to 46.96%
$300 - $50,000
3 - 60 months
No min. income or employment requirements
Min. credit score: 300
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An online broker with the largest lender network in Canada. Get matched for free with lenders offering both unsecured and secured loans through one quick application regardless of your financial situation.
OFFER
Mogo Personal Loan
9.90% - 46.96%
$200 - $35,000
6 - 60 months
Min. income of $13,000 /year
Min. credit score: 500


Mogo offers a 100-day money-back guarantee. If you're not happy with your loan, pay back the principal and get your 100 days of paid interest and fees back.
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An online lender who aims for a hassle-free process through same-day unsecured loan approval and funding. Get a loan fast and track your credit score for free.
Fairstone Personal Loan (Unsecured)
26.99% - 39.99%
$500 - $25,000
6 - 60 months
Able to make monthly repayments on your loan
Min. credit score: 560
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An online lender with a team dedicated to professional service. Get a quote for an unsecured loan without impacting your credit score. Receive funds within as little as 24 hours. No prepayment fees.
Fairstone Personal Loan (Secured)
19.99% - 23.99%
$5,000 - $50,000
60 - 120 months
Must be a homeowner
Min. credit score: 560
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Use your home equity to get a secured loan up to $50,000 with flexible repayment options and a long loan term. Get a quote without impacting your credit score.
Loan Away Personal Loan
19.90% - 45.90%
$1,000 - $5,000
6 - 36 months
No min. income or employment requirements
Min. credit score: 300
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A lender that approves unsecured loans in as little as 20 minutes. Get affordable monthly repayments with any credit score.
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Should you get a variable-rate or fixed-rate personal loan?

One is not inherently better than the other. It all depends on your personal circumstances and current economic conditions.

Why you might consider it:

  • Competitive rates. A possible lower starting interest rate is usually what attracts borrowers.
  • Potential decrease in rate. When prime rates drop, you’re not locked into a fixed rate, letting you enjoy lower repayments and a cheaper overall loan cost.

Why you might rule it out:

  • Interest rates are unpredictable. As the market fluctuates, so does your interest rate. If your rate rises, your monthly payment will also increase, and the loan may cost you more in the long run.
  • Harder to budget for. Variable-rate loans are sensitive to economic conditions, and the interest rate of your loan will change over the duration of paying it off – making it harder to budget monthly repayments.

How to weigh your options

Consider these factors when comparing personal loans:

  • Repayment flexibility. You should confirm the repayment flexibility of your loan before you apply. Will you be able to make additional payments or pay it off early without facing extra fees?
  • Fees and charges. Check if there are any upfront or ongoing fees when comparing variable-rate loans, as they could significantly increase the cost of your loan.
  • Total cost of the loan. You should consider how much the loan will cost in total. This depends on a few factors including how long the loan term is, payment frequency, interest and any other fees that come with the loan. Compare the APR of different loans to get an idea of the true cost.

What is an APR?

The annual percentage rate (APR) incorporates both the interest rate and fees to show you the true cost of a loan.

Costly mistakes to avoid

  • Borrowing more than you can repay. Only borrow the amount that you actually need since you’ll be paying interest on the borrowed funds. Defaulting on any kind of loan leads to a negative mark on your credit file and if your loan is secured, you will lose your collateral.
  • Extending terms longer than needed. A shorter loan term means you pay less interest — and the loan is ultimately cheaper — so you may want to consider choosing the shortest term that’s manageable on your budget. Some lenders might try to convince you to take a longer loan term and offer lower monthly payments as a selling point – but your loan will cost you more.

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Bottom line

While a variable-rate loan can save you money over the life of your loan, unexpected increases in the prime rate can send your interest rate far higher than a fixed-rate loan. Before applying for a variable-rate loan, compare your personal loan options to find the right one for your needs.

Frequently asked questions about variable-rate loans

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