Loans In Canada: Everything From Personal Loans To Student Loans

Loans in Canada can be a convenient way to meet a huge expense, like paying your tuition or buying a car. They can be used for personal reasons, business reasons, or even debt consolidation.

Getting a personal loan can allow you to consolidate all that you owe under a lower interest rate.

No matter what you need, the right personal loan at a low rate can be a big help in accomplishing your goals. Here's what you should know about getting a loan in Canada.

How loans work in Canada

In Canada, loans typically consist of a one-time amount of money borrowed for a specific period. The borrower is usually required to repay the loan in installments, along with any applicable interest.

Interest is the real reason why lenders are willing to give you a loan – it gives lenders and banks a way to make a profit simply by letting other people temporarily borrow money that they, the bank, already have.

While all loans favour the bank in the end (otherwise they wouldn't bother charging interest at all), each bank or institution doing the lending has specific types of loans and particular details unique to them.

Secured vs. unsecured loans

The main difference between secured and unsecured loans is that secured loans require that you put up some collateral (i.e. your home) and unsecured loans don't.

There's more personal risk involved with a secured loan, but the trade-off is the (usually) lower interest rate. Lenders can offer these rates since there's less chance you won't pay it back.

Secured loans are also often the only option you'll have if you have bad credit. If you have decent credit, a typical, unsecured loan makes much more sense as there's far less risk involved.

Here's a look at the pros and cons of unsecured and secured loans:

Unsecured loans

Secured loans

What to look out for when getting a loan

When looking for a loan in Canada, there are three key things to look at before signing on the dotted line:

• Who's the lender?
• What are the terms?
• How high is the interest rate?

The lender

The first questions to ask are about the lender itself. Do you recognize the name? Are they reputable?

Make sure it's a major bank in Canada, or from a financial institution you know and trust.. With a major bank, you may end up getting a slightly higher interest rate.

But the internet is full of places where you can get loans for less, which is why you want to ask questions and do your homework.

A quick Google search can reveal these answers, but keep in mind that people really enjoy griping about poor experiences online, and aren't always as eager to report satisfactory experiences.

The term

Next up – the term of the loan. How long is your loan? How often do you have to make payments? And when is your first payment?

The longer your term is, the lower your payments will be. However, you'll also be paying more in interest. Try to get a term that suits what you can afford to pay back, but not with payments so low that it'll take forever to pay back.

The interest rate

Finally, there's the interest rate. In this case, you'll generally want the lowest rate possible. The lower the interest rate, the less you'll have to pay for your loan, and the happier you'll be.

The best way to get the best interest rate? Shop around. Don't just stick to your bank – take a look at what others are offering before deciding what you should get for a loan.

To see how much a lower interest rate could save you, you can turn to our interest calculator.

Types of loans

There are quite a few types of loans available for Canadians, ranging from more general personal loans to very specific wedding loans, and more.

Personal loan

A personal loan is more of an umbrella term for all the different loans you can get for personal reasons – think of it as the "other" category on loan search websites.

You can use these for pretty much anything you need – even to cover other more specific loans, like a new car, for example.

Line of credit

A line of credit is a different sort of loan where the lender gives you access to a certain amount of credit that you can borrow from and pay back whenever you want. You can't borrow more than your credit limit, of course, and you'll have to make minimum payments on the amount borrowed.

A personal line of credit can be used for almost anything you want. You can consolidate debt, take on some outstanding home improvement projects, or finally take that dream vacation.

Small business loan

A small business loan is tailored towards business owners who know they need to spend money to make money.

It can be an expensive task to start up a business and to create new projects along the way, so a business loan can cover the missing gap between your profit and what you need to buy.

Car loan

Car loans are pretty straightforward and common when buying a car. They cover the cost of your car, whether it's new or used.

Buyers are usually offered car loans directly from the dealership itself, but that doesn't mean you can't shop around and find car loans elsewhere at lower interest rates.

Canada student loan

Canada government student loans are mostly given out by your province/territory and the federal government.

Tuition costs are high – and students are often just starting out, so they don't have a lot of savings built up yet. Government student aid helps you cover tuition and sometimes other related expenses so you can study.

Payday loan

Payday loans are short-term loans you can get right away, but they're also very expensive. In fact, their extremely high fees can be equivalent to interest rates in the 500% range.

But when you're in a situation where you've got to choose between a payday loan, not making rent, or not being able to get that emergency surgery for your pet…the number might not seem so astronomical.

Luckily, payday loans are regulated in Canada by province. See "Payday loans" for more info.

Debt consolidation loan

Debt consolidation loans are taken out in order to cover existing debt that has higher interest rates.

For example, if you have $1,000 in debt on your credit card at a 19.99% interest rate, you could take out a debt consolidation loan for a lower rate, pay off your credit card, and repay the consolidation loan for less money.

You can also pay off several different sources of debt at once with this type of loan, consolidating them into a single, lower monthly payment that can be easier to manage.

Major purchase loan

If you have a major purchase coming up that needs your attention but you just don't have the funds to cover it, a major purchase loan could help you out.

This can be anything from a new fridge to a new boat.

Home renovation loan

Paying for a kitchen remodel or other major home renovation project can be overwhelming, so some people opt for a home renovation loan to pay for it all.

This can also help consolidate your loan all in one place, instead of making different installment payments at various stores.

Medical loan

Medical loans can help you pay for major hospital expenses, like surgery or dental work, that your health insurance may not cover.

Vacation loan

Some people opt for a vacation loan to help cover the difference between their savings and the cost of their dream trip.

Engagement loan

If you want to get the perfect ring and propose to your loved one but aren't ready to drop a lot of money all at once – getting an engagement loan can help cover the difference.

Wedding loan

Getting a wedding loan can help you consolidate all the numerous, expensive costs involved with planning the event. This can include the venue, food, photography, and/or whatever else you need.

Special occasion loan

If you want some help covering the costs of a graduation celebration, vow renewal, or any other type of event, a special occasion loan could help you out.

Taxes loan

A tax loan can help you make ends meet, pay back anything you owe to the government, and avoid paying penalties to the CRA.

Rainy day loan

A rainy day loan can help you cover some emergency expenses you didn't see coming. Emergency funds are nice and all, but sometimes it's just not possible to put some money away after you finish covering your expenses.

Household expenses loan

If you're having trouble stomaching your rent, heating, water, and internet expenses – a household expenses loan can help you get through the month.

Bridge loan

A bridge loan is helpful when you're ending one loan and moving on to the other, but the liquidity of the previous loan just isn't there. This is especially common with mortgages.

This type of loan can help cover the in-between expenses, acting as a bridge from one loan to the other.

Baby loan

If you don't have enough immediate funds to cover all the initial expenses of having a baby – like the crib, the car seat, the diapers, the stroller, and the clothes – a baby loan could be a viable option for you.

Calculating the interest on your loan

Want to see how much you'd end up paying by the end of the loan? How about how much your monthly payments would be?

Check out our easy-to-use and instant free personal loan calculator:

Loan Values

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Loan repayment period (in years)

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Flexible Terms

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Overview Pros & Cons Product Features

Overview

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