Personal loans are fixed amounts of money that you borrow from a lender and pay back over a specified period of time. Also known as an installment loan, personal loans can be used for any purpose, such as funding a home renovation, paying for your wedding, or even consolidating your debt.
Personal loans taken out to pay off your car (instead of going with the dealership) are quite common, which is the case for our #1 personal loan, Fairstone Personal Loans.
That said, borrowing large amounts of money is a decision to be taken seriously. That’s why you only want to deal with the most trustworthy loan companies offering the lowest rates.
Here's everything you need to know about personal loans in Canada.
Key Takeaways
- Fairview Personal Loans is the best personal loan product in Canada
- Personal loans can be used for funding large purchases or consolidating your debt.
- You can apply for personal loans through your bank or other online lenders.
- Make sure to check with several lenders to get the best rate possible.
Best personal loan in Canada 2025 winner: Fairstone Personal Loans
Flexible Terms
Minimum Loan Amount
$500
Maximum Loan Amount
$60,000
APR Range
N/A
Fairstone Financial is a Canadian lender and offers secured and unsecured personal loans to people who cannot normally obtain them from more traditional lenders. They’ve been around since 1923 and have over 240 branches in Canada.
Pros
- Fast approval and fast cash in hand
- Interest rates ever so slightly lower than their most immediate competitors
Cons
- Interest rates are still exceptionally high
- You must be a homeowner to get a secured personal loan
- Extra fees for a secured personal loan
- Customer reviews are not…stellar
Provinces
ALL
Eligibility
- Canadian citizen
- Employed
- Age of majority
Why You Want It
Loans of $500 to $60,000 available + No prepayment penalties online.
Special Features
- They offer various types of insurance you can purchase
Pre-approval
Flexible Terms
Loan Amounts
$500 - $60,000
APR Range
N/A
Term Range
N/A
Minimum Credit Score
N/A
Secured Available
The best personal loan in Canada for 2025 is the Fairstone Personal Loans. Fairstone offers a fast, flexible, and secure lending solution to Canadians needing some extra funding.
Whether you’re managing unexpected expenses, consolidating debt, or funding a major life event, Fairstone offers tailor-made loan options with competitive rates and clear terms. The application process is straightforward, approval is quick, and it is easier than ever for individuals to access the financial support they need.
How we picked the best personal loan
To evaluate personal loans, we analyze over 15 data points to generate a trustworthy Genius Rating. We consider all aspects of a personal loan, including loan amounts, APR range, term range, access to pre-approval, customer satisfaction, and how flexible the terms are, to assess its overall value. Then, the personal loan’s features are rated based on how they stack up against other available options.
How do personal loans work?
A personal loan is a lump sum of money borrowed from a lender, with the agreement that you will repay it in fixed monthly installments until the full amount, including interest, is paid off. This makes personal loans a type of installment loan.
To obtain a loan, you must complete an application and undergo a credit check. You will also need to accept the lender's terms, which outline the agreed interest rate, repayment schedule, and any other relevant details regarding the loan.
With a personal loan, you can typically borrow anywhere from $100 to $50,000. Interest rates can vary from close to 4% (in the best-case scenarios), to 46% or higher (in the better-to-avoid scenarios). Personal loan interest rates largely depend on:
- Your credit score
- The lender
- Whether you're providing collateral
- Amount of money you're receiving
If you do provide collateral, your loan is considered "secured" and you can often qualify for lower rates. Keep in mind that if you're unable to pay off your loan for any reason, you'll need to forfeit your collateral. The most common example of this is with a Home Equity Loan, where your house is what's on the line.
What can I use a personal loan for?
In most cases, personal loans can be used for anything you need them for. Here are a few examples of common use cases:
- Major renovation
- Used or new car
- Debt consolidation
- Vacation
- Wedding
- Emergency expenses
- Education
- Business
- Moving costs
- Major purchases
You'll often be asked the purpose of your loan when filling out the application, but the application will usually have the option of choosing "Other."
How to qualify for a personal loan
Ultimately, qualifications for a personal loan will vary depending on the lender. But for the most part, a good credit score, stable income, favourable debt-to-income ratio, and the ability to provide collateral are the key factors in qualifying for a personal loan.
- Credit score: Your credit score is key to receiving a personal loan – as a rule of thumb, you’ll want your credit score to be at least 720 in order to secure a personal loan with favourable terms.
- Stable income: Demonstrating you have a steady income, and that you can cover the loan amount + interest, will be a key consideration for lenders.
- Debt-to-income-ratio: Debt-to-income ratio measures how much of your pre-tax income goes to servicing your debts – in general, a debt-to-income ratio below 36% will put you in a position to receive a loan with favourable terms.
- Collateral: Offering collateral (such as equity in your home) is required for a "secure" loan, and reduces the lender’s risk – if you default on the loan, the lender may seize your collateral.
How to apply for a personal loan
Before you actually apply for a personal loan, figure out how much money you need to borrow, go over your finances to ensure you can cover the loan, compare lenders, and pre-qualify for loans.
- How much to borrow: Determine how much money you need to borrow before doing so – you don’t want to be stuck having to repay a loan that you can’t afford.
- Double-check your finances: Review your financial situation to make sure you can afford the loan you’re taking out, and make sure your credit score is at least 720 to ensure favourable loan terms.
- Compare lenders: Don’t be afraid to shop around for the best interest rate, repayment terms, and fees – be sure to review lenders’ conditions to determine which lender is the best fit.
- Pre-qualify: Pre-qualifying for a loan usually only requires offering minimal information – you’ll be able to review terms for the loan you are likely to qualify for, and the lender’s soft credit check will not affect your credit score.
Once you have done your due diligence, you are ready to apply for a personal loan. Be prepared to be asked for the following information when applying for a loan:
- Government-issued ID
- Proof of residence
- Financial information such as income documentation
- Your tax return
Depending on the lender, you may be able to apply online. More traditional lenders, such as banks and credit unions, may require you to apply in person.
How long does it take to be approved for a personal loan?
Depending on where you apply for a personal loan, it can take a few minutes or a few days to get approval. Once you formally apply for a personal loan, lenders will do their due diligence and review your application and financial picture before approving your application.
- Traditional banks and credit unions: These traditional financial institutions tend to have stricter eligibility requirements, so approval can take a few business days, or – depending on the size of the loan – a few weeks.
- Online lenders: Approval times depend on the lender, but online lenders tend to approve loans much quicker than traditional institutions, with approval often coming immediately or within a few hours.
How to compare personal loans
When you’re looking for a personal loan, thoroughly examine all of your options to find the best fit for you.
When comparing loan options, consider the following:
- Interest rate: Also known as the annual percentage rate (APR). The higher the interest rate on your loan, the more you’ll have to pay.
- Variable or fixed rate: If your interest rate is variable, it will fluctuate based on the Bank of Canada’s rate; if your loan carries a fixed interest rate, you’re monthly payment won’t change.
- Amount: Lenders will differ in how much they will loan out, and what their loan caps are.
- Term: The term depends on the lender and/or the size of the loan – bigger loans usually carry longer term lengths.
- Fees: Again, fees vary from lender to lender – get a handle on each lender’s fees before choosing a loan option.
- Approval time: Depending on how quickly you need your loan, this could be a big consideration – traditional financial institutions tend to take longer to approve loans than online lenders.
Where to get a personal loan
You can apply for and receive a personal loan from:
- A traditional bank
- A credit union
- An online bank
- Online lenders
- Alternative lenders (like MoneyMart)
Your best bet for obtaining a personal loan is from a traditional lender, like a bank or credit union. Not only are these types of institutions regulated, but a pre-existing relationship with an institution may help you qualify for better loans.
There are also many online loan lenders that may be able to offer attractive loan options (like LoanConnect), but read the fine print and make sure you're getting a good deal.
Alternative lenders are best avoided at all costs. They're the payday lenders, title loan companies, private lenders, and pawn shops. The interest rates from these loans are aggressive and often as high as 400%, not to mention requiring collateral to secure the loan. They're only mentioned here so we can recommend avoiding them.
Personal loan vs. line of credit
You can borrow money with a personal loan or a line of credit, but there are several key differences when it comes to how you access your funds and how (and when) you pay it back.
A personal loan is an installment loan, meaning there is a set amount you have to pay back every month for a set amount of time. You get all your money at the front and pay it off a little bit at a time until it's gone. You accumulate interest on the full amount.
With a line of credit, you get access to credit that you can dip into as much or as little as you want. You don't have to pay interest on anything you don't use, but interest accrues immediately on anything you take out. You only have to pay back a minimum amount every month (which is just the interest).
Here's a table that can put the two types of loans into perspective:
| Type of loan | Personal loan | Line of credit |
|---|---|---|
| Repayment terms | Predetermined payment schedule for duration of term | Must pay at least the minimum payment |
| Disbursement | Lump sum | Recurring |
| Interest charges | Charged on the full amount | Charged only on the amount you take out |
| Interest rates | Usually fixed | Usually variable |
| General purpose | One-time expenses | Ongoing expenses |
5 things to be mindful of when applying for loans
There are five things you should keep in mind when taking out a personal loan in Canada.
1. First, let's understand personal loan rates
Be mindful of personal loan rates. A small change in your interest rate can make a huge difference in your finances.
For example, if you take out a 1-year loan of $20,000 to build a deck and a pool, with an interest rate of 15%, the math works out like this:
$20,000 X 15% = $3,000 (interest) + $20,000 (principal) = $23,000
At the end of the year, you'll owe $3,000 more than you borrowed.
In the same vein, say you have a $50,000 loan with a one year term.
| Interest rate | Total owed |
|---|---|
| 10% | $55,000 |
| 11% | $55,500 |
| 12% | $56,000 |
| 15% | $57,500 |
| 20% | $60,000 |
Even a difference of a single percent can turn into hundreds more dollars in interest.
If we were to look at more complex examples with longer terms and compound interest, you'd see an even bigger difference.
With compound interest, you see interest applied to your principal each month, and you make your payments primarily paying down the interest. This means you're only putting a little bit towards the amount you actually owe. This is how credit cards, mortgages, lines of credit, and most other loans work.
2. Make sure you can afford the monthly payments in the long run
Be sure you can afford the monthly payment, and that you'll still be comfortable carrying the loan. You don’t want to shortchange yourself if an emergency happens.
You can’t tell the future – car repairs, unforeseen illnesses, flooding – and life can become costly quite quickly.
3. Make sure to plan ahead
If you're planning a big home project in the spring or summer, start negotiating months in advance and shop around – not days before. This way you won’t rush into agreeing to a less-than-ideal rate.
4. Pay attention to the prime rate
Most of the banks in Canada base their interest rates on the prime rate, which in turn follows the Bank of Canada’s interest rate. These can fluctuate at any time, so it's good to keep an eye on them if you have a variable rate.
Watch the news for any signs of a shift. If they're calling for an interest rate hike, try to lock in a loan early and get a fixed rate to avoid fractionation of your interest rate. Check places like CBC for current information on interest rates and the Bank of Canada.
5. Know your credit score
Another important thing to know is your credit score. The interest rates available to you will be dependent on this number.
Your credit score is determined by a few things. The most important are how much credit you have and how good you are at paying your bills on time, regularly and continually.
What if I have bad credit?
Be careful. If you have bad credit, you might not qualify for a loan from a traditional lender.
If you're looking at some alternative options, like payday loans and private lenders, be aware of the rate you're being offered.
Personal loans aren't as scary as you think
With a sound budget, you should know how much money you can afford to spend on a monthly or bi-weekly payment.
If you budget for your loan and still have money to put aside for car repairs and other repairs, while for a few luxuries, you should be fine. But remember Christmas comes every year, so you'll need to save for that too.
Watch for changes in the prime rate and shop around with different institutions to compare their rates and terms.
And be sure you really need the loan. Do you really need the thing you're planning to spend the money on? Is it worth the expense of the interest payments? Or could you just wait and save for it?
If you're careful, loans can really help you out. But falling into debt is much too easy to do and expensive to get yourself out of.
Editorial Disclaimer: The content here reflects the author's opinion alone, and is not endorsed or sponsored by a bank, credit card issuer, rewards program or other entity. For complete and updated product information please visit the product issuer's website.
FAQ
What is a personal loan?
A personal loan is a lump sum payment you can receive for a variety of reasons. You are required to pay back a set amount every month until you've returned the full principal plus the agreed-upon interest.
What can a personal loan be used for?
A personal loan can be used for almost anything. Whether it's consolidating existing debt, buying a car, or getting some renovations done, there's no limit to what you can do with the cash from personal loans.
What's the difference between a personal loan and a line of credit?
They may seem similar, but there are some differences. A personal loan is a set amount of money you borrow, with a pre-determined payback schedule. A line of credit is simply an amount of money you can borrow, you can take as much or as little as you want.
How can I calculate my payments on a loan?
Our trusty personal loan calculator can help. Simply enter in how much you're borrowing (principal), length of the loan, and interest rates. You'll then see how much interest you'll pay, and what your payment will look like.
Where's a good place to look for a personal loan?
The best personal loan in Canada is Fairstone Personal Loans. If you want to shop around, we suggest taking a look at LoanConnect, a sort of loan search engine that can help play matchmaker for a new loan.
What bank is best for personal loans in Canada?
Making sure you stick to a lender you trust is pivotal in getting the right personal loan for you. While paying attention to the interest rate is one thing, the reputation of the company is a whole different ball game. Stick to well-known lenders to be safe.
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