Personal Loans in Canada: Rates, Real Cost and Tips

Q: What is the current interest rate for a personal loan?

It depends mostly on your credit score , the collateral you offer and the term, with the prime rate setting the floor. A bank will offer you a much lower rate if your file is strong, while an alternative lender can go up to the 35% legal ceiling. On $15,000 repaid over 5 years, the gap between 8% and 35% is more than $13,000 in interest.

A personal loan lets you borrow a fixed amount and repay it in regular payments over a term set in advance. In Canada, its rate can no longer exceed 35% a year since January 1, 2025, and your credit score largely decides where you land under that ceiling. If you mostly want to clear a card balance you can repay within a year, we suggest you first look at a low-rate card like the CIBC Select Visa* Card, which offers 0% on balance transfers for 10 months. For a bigger project, here is how a personal loan works, what it really costs you and how to get a better rate.

What is a Personal Loan?

A personal loan allows you to borrow a sum of money from a lender, which you repay within a predetermined period of time. You can apply for a loan for a variety of reasons, such as home renovations, urgent repairs to your house or car, debt consolidation, etc. The features and conditions differ for secured and unsecured personal loans.

Secured Personal Loan

A secured personal loan is a loan that is secured by an asset such as a home. Borrowers typically use this type of loan for home renovations or major unexpected expenses. Since the loan is secured by an asset, it generally allows for a higher amount at a lower interest rate, compared to an unsecured personal loan.

Collateral: required (e.g. house, car, savings)
Loan amount: several thousand dollars (varies according to several criteria, including the market value of the collateral)
Interest rate: low (lower than an unsecured loan)
Loan term: several years

Unsecured Personal Loan

An unsecured personal loan is a loan that is not secured by an asset such as a house. This type of loan is protected only by a contract signed by the borrower. Borrowers often use this type of loan for debt consolidation or emergencies. Since the loan is not backed by an asset, the amount that can be borrowed is generally lower, and the interest rate is higher.

Collateral: not required
Eligibility: several factors, including your credit score (it is possible to obtain an unsecured personal loan despite a poor credit record, but check requirements and conditions)
Loan amount: a few hundred to a few thousand dollars
Interest rate: high (higher than a secured loan)
Loan term: variable (often varies from a few months to a few years)

Why Apply for a Personal Loan?

A personal loan can be used for a number of reasons, including:

Debt consolidation
Urgent repairs to your car or home
Education (check to see if you qualify for student loans or LLP from your RRSP)
Vacation
Home improvements and renovations
Car purchase (check if you qualify for a car loan)
Wedding
Medical bills
Funeral
Etc.

Ideally, don’t apply for a personal loan to buy consumer goods or experiences. Also, check your budget to make sure you have the financial capacity to make the payments and meet the deadlines of your personal loan.

Debt consolidation is one of the most common reasons Canadians take out a personal loan. You group several debts into a single payment, which makes them easier to manage and, in many cases, cheaper: if you carry balances on several credit cards, you can pay them off with the loan and then make one monthly payment, often at a lower rate. Consolidation only works if your spending habits change too, or you risk running up new balances on the cards you just cleared.

How Much Can You Borrow?

The amount you can borrow with a personal loan varies according to a number of factors. According to the Financial Consumer Agency of Canada, most personal loans range from $100 to $50,000, over a term of 6 to 60 months. For example, if you opt for an unsecured loan, you can borrow a relatively small amount.

Conversely, if you opt for a secured loan, you can borrow a much higher amount (and over a longer term). Why? This is because the collateral can be seized by the lender if you default on your payments or go bankrupt.

In short, make sure you have the financial capacity to take out this personal loan.

Where Can I Apply for a Personal Loan in Canada?

There are several loan options and personal financing products available from banks and alternative lenders.

Traditional Lenders

Traditional lenders include banks and credit unions. They are often the best option for obtaining a personal loan in terms of conditions and interest rates. However, eligibility criteria are often more restrictive than other personal financing options. If you need loan insurance, traditional lenders generally offer this option.

What’s more, there are online banks like Tangerine that offer competitive rates on personal loans and lines of credit. In short, the options are many, and you need to do your own research to find the personal loan that suits your financial situation and goals.

Alternative Lenders

There are also alternative lenders, ranging from loan providers like Fairstone Financial to title loan companies and payday lenders. Often, conditions are less attractive and interest rates are higher. But this isn’t always the case. If you need to obtain a personal loan from an alternative lender, check the repayment schedule, terms and conditions, among other things. Also, check whether you can repay your loan faster, without penalty.

Other Personal Financing Options

Other options exist, such as a personal line of credit or a credit card cash advance. Be careful with cash advances: interest usually starts accruing the day you withdraw the money, often at a higher rate than purchases. The 0% promotions you see on credit cards almost always apply to balance transfers, not to cash advances.

Finally, you can take a look at low-rate credit card offers.

How to Qualify for a Personal Loan?

To obtain a personal loan, you need the following to qualify:

Canadian resident aged 18 or over
Proof of residency (e.g. utility bill)
Bank account in good standing
Proof of income
Proof of monthly expenses and payments, including debts

Even if you demonstrate all these elements, a lender may still refuse you a personal loan. For example, if your debt ratios are too high or if you’ve recently filed for bankruptcy. A federally regulated bank must offer you a loan that suits your situation and tell you if a product isn't right for you, and any loan insurance it offers is optional.

Lenders look closely at your debt ratio: if a large share of your income already goes to existing debts, a new loan is harder to get approved. Before you apply, work out the monthly payment you can really afford, and gather your documents in advance (proof of income, ID, details of your current debts): a complete application speeds up the review.

What Is the Interest Rate on a Personal Loan?

The interest rate on a personal loan varies according to a number of factors, including the Bank of Canada’s prime rate, your current financial situation, your credit score and more. What’s more, some financial institutions are more inclined than others to offer advantageous interest rates, often with online banks. Finally, compare rates using an online comparator, and keep an eye out for promotional offers.

Fixed or Variable Rate?

Fixed or variable rate on a personal loan
Rate type	How it works	Main advantage
Fixed rate	The rate stays the same for the whole term	Predictable payments
Variable rate	The rate can change with market conditions	Can benefit from a rate drop

A fixed rate makes your budget easier to plan, since your payments usually stay the same. A variable rate can work in your favour when rates drop, but your payments or the total cost can climb if they rise. To compare offers, look at three things: the annual rate, the fees and the early repayment terms.

Other Considerations

Credit Score

A good credit rating helps you get approved for a personal loan and, above all, get a better rate. Check your credit score before you apply: it reflects your payment history, your credit utilization ratio and the length of your credit history. You can request your report from both credit bureaus, Equifax and TransUnion.

However, you should be aware that lenders can refuse you a personal loan for a number of reasons. For example, if you have bad credit. If this is the case, consult the guide below to improve your credit score. It contains several tips.

If you're carrying card balances, a balance transfer card can cost you less than a loan. The CIBC Select Visa* Card costs $29 a year, refunded the first year, charges 13.99% on purchases and offers 0% on balance transfers for up to 10 months, with a 1% transfer fee, according to CIBC. On a $5,000 balance at 20.99%, that saves you about $825 over 10 months, as long as you repay it before the promotion ends.

Compare

CIBC Select Visa* Card

CIBC First-Year Annual Fee Rebate

Annual feeNo annual fee the first year: $0 $29
Our valuationMilesopedia first-year estimate First-year valueAnnual fee rebated$29Total$29Rewards on your spending are not included. The calculator that adds them from your own profile is on the card's page.: $29
Welcome offer$29 annual fee rebated: First-Year Annual Fee Rebate

The CIBC Select Visa* Card is one of the best Visa credit cards in Canada for balance transfers.

With this exclusive digital offer for this CIBC balance transfer credit card, you get:

a 0% interest rate on balance transfers of at least $100, for up to 10 months
a refund of the annual fee for the first year^†

You only pay a 1% balance transfer fee when transferring a balance from another credit card (balance transfer fees do not apply to Quebec residents). Once the promotional period ends, the card’s standard interest rate of 13.99% applies to any remaining balance. This interest rate is lower than those charged by many other credit cards.

For example, you could make large purchases on another credit card (such as renovations or furniture and appliance purchases) and then transfer the balance to the CIBC Select Visa* Card to benefit from its 0% interest rate on balance transfers for 10 months.

CIBC Select Visa* Card cardholders can also save on gas through the card’s partnership with Journie Rewards, which allows them to save up to 10 cents per litre at participating gas stations.

The CIBC Select Visa* Card has a $29 annual fee (refunded for the first year) and requires a minimum household income of $15,000 to qualify. With CIBC mobile banking and online banking services, you can easily track your credit limit and balance transfers from your phone or by signing in online.

Legal

^† Terms and conditions apply. Click on Apply Now to learn more.

Annual fee

Primary card$29

Additional card$0

Annual income required

Individual$0

Household$15,000

Conversion fees

2.5%

Earning rate

0xAll spending

Value

1st Year Value$29

2nd Year Value$29

How Much Does a $15,000 Loan Cost?

Here is what a $15,000 personal loan over 5 years costs you depending on the rate you get. The same amount can cost you $3,249 in interest, or more than five times that: your credit score and the collateral you offer make the difference. Before you apply, compare at least two or three offers from Canadian lenders with the same term.

Cost of a 15,000-dollar personal loan repaid over 60 months, by annual rate (monthly payments, Milesopedia calculation)
Annual rate	Monthly payment	Total repaid	Interest paid
8%	$304.15	$18,249	$3,249
12%	$333.67	$20,020	$5,020
20%	$397.41	$23,844	$8,844
35% (legal ceiling)	$532.35	$31,941	$16,941

Personal Loan or Credit Card?

Personal loan or credit card: how they compare
Criterion	Personal loan	Credit card
Amount	Set at the start	Available credit limit
Payments	Usually fixed	Vary with the balance
Term	Set in the contract	Revolving
Interest rate	Often lower	Often higher
Best for	A specific project	Everyday spending

A personal loan works best when you know the exact amount you need and want a clear repayment schedule. A credit card gives you more flexibility, but it gets expensive fast if you don't pay the balance quickly, and cash advances usually start charging interest the day you take them.

How a Personal Loan Affects Your Credit

When you apply, the lender may check your credit file. That inquiry can show up in your history and lower your score for a while. The loan also adds to your total debt, which lenders look at the next time you ask for credit.

Over the long term, your behaviour after you get the loan counts most. Paying on time shows lenders you are a responsible borrower, while late payments can hurt your file and cost you better terms later. You can check your file with Equifax and TransUnion to see the information used to calculate your score.

Debt Spiral

If you are over-indebted, avoid applying for another loan. Your financial health could deteriorate rapidly and you could enter a debt spiral. If this is the case, consult the following guides for our best tips:

Obviously, if it’s an emergency, you have to act. But don’t hesitate to ask for help. For example, you can contact a non-profit credit counselling agency in your province (in Quebec, your local ACEF, or Association coopérative d’économie familiale). These organizations offer free or low-cost budgeting and financial education services. Alternatively, you can contact your financial institution to assess your options. Finally, you can contact a bankruptcy trustee to discuss options such as debt consolidation and a consumer proposal.

Pros and Cons of a Personal Loan

Personal loan: pros and cons at a glance
Pros	Cons
Predictable payments	A new financial obligation
Often a lower rate than many credit cards	Interest to pay over the whole term
Can simplify debt consolidation	Risk of building up new debt
Clear repayment schedule	Possible fees, depending on the lender

Used as a tool, a personal loan works in your favour: the main risk is treating the money as extra income instead of a debt to repay. If you pay off your cards with a loan and then run up a new balance on those same cards, you can end up owing more than when you started. Before you borrow, have a clear repayment plan.

Alternatives to a Personal Loan

If the expense isn't urgent, saving first lets you pay for your project without adding a new debt. It takes more patience, but a budget that sets aside a fixed amount each month gets you there with zero interest.

A personal line of credit gives you more flexibility: you usually borrow only what you need and repay according to your contract. That flexibility can also work against you if it pushes you to spend beyond your means, so set a ceiling for yourself before you draw on it.

Bottom Line

In short, there are many types of personal loans and many types of lenders. If you need this loan, check your budget to make sure you have the financial capacity to make the payments and meet the deadlines. There are many reasons to apply for a personal loan. If possible, save the amount of money you need to pay your expenses without going into debt. However, if it’s an emergency and you don’t have emergency funds, a personal loan is one of the options available.

To follow our low-rate card comparisons and get member-only offers, create your free Milesopedia member account.

Frequently Asked Questions

What is the current interest rate for a personal loan?

It depends mostly on your credit score, the collateral you offer and the term, with the prime rate setting the floor. A bank will offer you a much lower rate if your file is strong, while an alternative lender can go up to the 35% legal ceiling. On $15,000 repaid over 5 years, the gap between 8% and 35% is more than $13,000 in interest.

Which is the best bank for a personal loan?

There’s no such thing as the best bank for a personal loan. But, be aware that there are several types of lenders, such as traditional banks and alternative lenders. But, also, personal financing products. Each lender has its own eligibility criteria for personal loans.

Which bank is the easiest to get a loan from?

Each bank has its own eligibility criteria for personal loans. Some banks are more flexible than others. What’s more, if you pledge an asset as collateral, banks will generally be more flexible in granting you a personal loan.

How much can I borrow for a personal loan?

It depends on your income, your credit file and your debts. Most personal loans range from $100 to $50,000 over 6 to 60 months, according to the Financial Consumer Agency of Canada. If you opt for an unsecured loan, you can borrow a relatively small amount. Conversely, if you opt for a secured loan, you can borrow a much higher amount.

What is the maximum legal interest rate on a personal loan in Canada?

Since January 1, 2025, Canada's criminal interest rate is 35% APR, all borrowing costs included, and payday loans are capped at $14 per $100 borrowed. If a lender offers you a loan above that ceiling, the offer is illegal and you should walk away.

Can I pay off a personal loan early?

In most cases, yes. Your contract states whether you can make extra payments or repay the full balance before the end of the term, and whether a penalty applies. Read that clause before you sign: paying early without fees is one of the simplest ways to cut the total cost of your loan.