Low Interest Loans in Canada

This Page's Content Was Last Updated: January 9, 2024
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What You Should Know

  • A low interest loan allows you to borrow money and repay it over a period of time at a low interest cost.
  • As of October 2023, the average interest rate charged by chartered banks for new personal loans (including auto loans) was 9.46%.
  • A low interest rate loan generally has an interest rate close to the prime rate.
  • A good credit score and a stable income are key requirements to get a low interest loan.
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What is a Low Interest Rate Personal Loan?

Personal loan interest rates offered by Canadian lenders often vary with the changes in prime rates. As of December 2023, the interest rates for personal loans in Canada approximately range between 7.20% and 45%. While the term low interest rate is subjective, the lowest available rates are generally close to the prime rate. The rates are currently higher than usual due to the elevated Bank of Canada rates as a measure to curb inflation. A good credit score and a reliable credit profile can be a big advantage when you get a loan. You can qualify for a loan at a low-interest rate, which can reduce the overall cost of borrowing significantly. The table below shows some of the best personal loan interest rates available in Canada.

Low Interest Rate Loan Providers in Canada

Loan ProviderInterest Rates
(December 2023)
Loan AmountTermProvinces
Spring Financial logoSpring Financial
9.99% - 46.96%$500 - $35,0009 months - 78 monthsAll provinces
SkyCap Financial logoSkyCap Financial
12.99% - 39.99%*Up to $10,0009 months to 5 yearsAll provinces except QC
Coast Capital Savings logoCoast Capital Savings
From 9.09%N/A1 to 8 yearsBC
ATB Financial logoATB Financial
7.20% - 14.20%N/A1 - 5 yearsAB
FirstOntario Credit Union logoFirstOntario Credit Union
From 9.24% N/A6 months - 5 yearsON
Meridian Credit Union logoMeridian Credit Union
From 7.70% N/AN/AON
Steinbach Credit Union logoSteinbach Credit Union
From 8.20%$5,000 +N/AMB
Loan Connect logoLoan Connect
8% - 46.96%*$500 - $50,0003 months to 10 yearsAll provinces
National Bank logoNational Bank
Fixed Rate from 9.65%
Variable rates from 12.2%
N/AUp to 5 yearsAll provinces
Desjardins logoDesjardins
Fixed rate from 15.29% Variable rate from 13.7%Up to $50,0006 months to 10 yearsMainly in QC

*APR (Annual Percentage Rate)

Average Personal Loan Interest Rate in Canada

As per data from the Bank of Canada, the average interest rate charged by chartered banks for new personal loans, including auto loans, in Canada as of October 2023 was 9.46%. Meanwhile, the average interest rate for outstanding personal loans was 6.98%. In the same month, the average interest rate of new consumer credit, including all personal loan plans, secured lines of credit and unsecured lines of credit was 9.04%.

Low Interest Loan Providers in Canada

There are several types of lenders offering low-interest-rate loans to well-qualified borrowers in Canada, such as:

  • Banks: Banks, including the big five banks, offer personal loans at very competitive interest rates but usually have very strict qualification criteria. Banks usually require you to have a high credit score and a stable source of income to get approved. Personal loan rates offered by banks are often dependent on their prime rate. Banks usually don’t advertise their personal loan rates and offer you rates based on your credit profile and overall financial situation. If you are a banking customer with a bank, you may have access to special promotions and offers from the bank.

    Key Features of Personal Loans from Big Banks

    BankLoan AmountTerm Features
    Not Specified1 - 5 years
    • No prepayment penalty
    • Option to skip a payment every year
    • Switch from fixed rate to variable rate anytime if prime rate goes down
    $5,000 to $50,0001 - 7 years
    • No prepayment penalty
    Not SpecifiedUp to 5 years
    • No prepayment penalty
    • Option to postpone a payment every year
    • Make an extra payment at any time
    From $2,000Up to 5 years
    • Option to defer a payment twice a year
    From $3,0001 - 5 years
    • No prepayment penalty
  • Credit Unions: Credit Unions offer some of the lowest interest rates for personal loans in Canada. In fact, credit unions often offer rates that are lower than banks. To be eligible for a personal loan from a credit union, you will first have to become a member of the credit union.
  • Online Lenders: There are several online lenders in Canada that offer quick approval and disbursement of funds. Most online lenders have lower qualification criteria but a higher interest rate compared to banks and credit unions. However, if you have a strong credit file and financial situation, the lenders may offer you loans at a lower interest rate. You should be very careful while dealing with online lenders, as the online lender market isn’t as regulated as banks and credit unions, and you could fall prey to predatory lenders or lending scams.
  • Online Brokers: Apart from individual lenders, there are some online brokers, such as smarter.loans and Loans Canada, that have multiple lending partners. They can help you get prequalified for a loan and find the lowest rate for your loan.
  • Peer-to-Peer Lenders: Peer-to-peer lending is a relatively new concept that allows you to get a loan from your fellow Canadians using an online platform. The two major peer-to-peer lending platforms in Canada are goPeer and Lending Loop. Lending Loop only offers peer-to-peer small business loans.

Cost of Low Interest Loan vs High Interest Loan

The table below compares the cost of the loan with a low interest rate vs a high interest rate.

Low Interest RateHigh Interest Rate
Loan Amount$5,000$5,000
Interest Rate8%30%
Term Length5 years5 years
Monthly Payment$101$162
Total Interest Paid$1,083$4,706
Total Lifetime Payment$6,083$9,706

We can see that with a high interest rate, the monthly loan payments, as well as the total interest are significantly higher than when the interest rate is low. You can use WOWA’s loan calculator to calculate the payments and interest paid on loans with different interest rates.

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How to Get a Low Interest Rate Loan?


  • Canadian citizen or permanent resident
  • Have a Canadian address and phone number
  • Age of maturity in the province of residence
  • Have an active bank account

Documents Required

The basic documents required for a loan application are listed below.

Passport / Driver’s License / Other Government-Issued IDIdentification
Utility billsProof of address (may not be required if the identification document shows address)
Paystubs and/or T-slipsProof of Income
Employment LetterProof of employment
Recent CRA My Account Assessment, NOA and corresponding T1 General 4-page summaryProof of employment or self-employment (May not be required if you aren’t self-employed)

Some lenders may require other documents such as a direct deposit form. If you have a cosigner on the application, their documents will also have to be submitted.

Application Process

The general steps involved in the loan application process are as follows:

  • Apply online or in person at a branch by filling out the application form and submitting all the required documents.
  • Receive a response from the lender within a few days or weeks.
  • Attend the interview if required by the lender.
  • Receive the approval letter if you have been approved.
  • Review the contract document and sign it.
  • Receive the funds in your account.

Types of Low Interest Rate Personal Loans in Canada

There are a few types of personal loans that typically have a low-interest rate:

  • Unsecured Loans: The most common type of loan that is offered by banks, credit unions and online lenders. To qualify for an unsecured personal loan with a low interest rate, the borrower must have a good credit score and a sound financial background.
  • Secured loans: Secured loans are loans that have been secured by collateral. The collateral is usually an asset such as a house. The collateral can be seized by the lender if you fail to repay the loan, lowering the risk for the lender. Thus lenders offer a lower interest rate for such loans.
  • Personal loans with a cosigner: If you have a bad credit score, adding a cosigner with a good credit score can help you lower the interest rate. However, if you are unable to make payments, the cosigner will be responsible for making the payments. If a payment is missed, it will affect the cosigner’s credit score as well.
  • Line of Credit: A line of credit, such as the Home Equity Line of Credit (HELOC), is an open-ended loan with revolving credit. You can borrow up to the authorized limit at any time, repay and borrow again without having to apply for a new loan. Lines of credit can also be secured by assets. For example, HELOCs are secured by your home equity. Lines of credit often have a variable interest rate, which is linked to the prime rate.

How Can You Qualify For Low Interest Rate Loans?

Having a strong credit profile and stable income can help you get a low-interest-rate loan. This is because lenders will perceive you as a low-risk borrower capable of paying off your loan. Listed below are all the factors that can help you secure a low-interest-rate loan in Canada.

  • Strong Credit Profile: Having a well-established credit history with a good credit score demonstrates responsible credit behaviour. This is because you build a good credit score by making on-time credit payments over a period of time. Meanwhile, missing payments or making late payments has a negative effect on your credit score, and delinquencies are noted on your credit file, which can be seen by anyone who runs a credit check on you.

    The higher your credit score is, the less risk you pose to the lenders, and thus lenders will be willing to offer you loans at a low-interest rate. Before applying for a loan, you can check your credit score for free (without affecting your credit score). If your credit score is low, you can work on improving your credit score before applying for a loan, as it can help increase your chances of approval and fetch you better terms for the loan.

  • Fewer Hard Credit Checks: Whenever you apply for any kind of loan or for a credit card, the lender runs a credit check on you, which is noted as a hard inquiry on your credit file. Having too many credit checks on your credit profile recently can be a sign that you have recently taken up too much debt or have been rejected by multiple lenders. Lenders perceive this as risky behaviour and may be unwilling to offer you a loan at a low-interest rate. Therefore, you should refrain from applying for credit very often and keep at least three months of gaps between credit applications.

  • Stable Income: Having a stable job or reliable source of income shows that you have the means to make loan payments on time. Being employed by a well-established company is perceived as lower risk by lenders than being employed by a new company. Meanwhile, salaried employees are viewed as less risky compared to contractors. Lenders typically want to see your proof of employment and income for the last two or three years to qualify you for a low-interest rate loan.

  • Minimum Income: Apart from having a stable income, many lenders also require you to meet a minimum income requirement. Lenders may reject your application if you don’t meet the minimum income requirement, even when you check all the other boxes. Typically, lenders require you to have a minimum monthly income of $1,200 to $1,500.

  • Low Debt to Income Ratio: The debt-to-income ratio is the ratio of monthly debt payments to monthly income. This ratio should ideally be under 40% to qualify for a low-interest-rate loan.

  • Collateral: Having collateral, such as a house, a car or even cash, can lower the risk for the lender as the lender can seize the collateral if you fail to repay the loan. Thus, lenders usually offer a lower interest rate for loans with collateral.

  • Net Worth: Your net worth is your assets minus your debt, and lenders look at your net worth to determine how much of a loan you can realistically afford. Having a positive net worth can help you qualify for a low-interest-rate loan. Meanwhile, you may not qualify for a low-interest-rate loan if you have more debt than assets.

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Considerations Before Getting a Low Interest Rate Personal Loan

Interest Rate, APR and Discounts

Before applying for a loan with a lender, you should compare the interest rates offered by different lenders, such as banks, credit unions and online lenders. You should also check if the rates offered are for secured and unsecured loans and if the rates are fixed or variable.

You should also look at the APR (annual percentage rate), which is the interest rate plus fees. You may also check for any rate discounts your bank may be offering its customers.


Lenders may charge different types of fees, such as fees for processing the loan, fees for missed payments, etc. The common types of fees the lender may charge include:

  • Application Fee: The lender may require you to pay a fee along with your loan application. This is known as the application fee or the underwriting fee. This fee covers the work that the lender has to do in order to assess your application. Oftentimes, lenders credit this fee towards the origination fee if the application is approved.
  • Origination Fee: The origination fee is the fee to administer your loan and is usually included in the APR of the loan. While the origination fee is usually 0.5% to 2%, some lenders may even charge 5% or more as the origination fee.
  • Loan Protection Plan / Insurance: Some lenders require you to purchase a protection plan to approve the loan. The protection plan protects the lender in case you default on the loan due to reasons including job loss, death, and illness. The cost of the insurance will be added to your loan amount.
  • Late Fees: Most lenders will charge a late fee when you are late on your monthly payment. This can be a fixed amount or a percentage of the remaining balance. If you know you are going to miss a payment deadline, you can talk to your lender in advance. Many lenders are flexible and may waive your late fees or allow you to defer a payment.
  • Monthly Processing Fee: Some lenders may charge a fee for monthly payment processing.
  • Prepayment Penalty: If you decide to pay off your loan early, the lender may charge you an early repayment fee.
  • NSF Fee: Many lenders require you to set up automatic payment withdrawals from your bank account. If the lender tries to withdraw the payment from your bank account, but the account has insufficient funds to cover the payment, the lender could charge you an NSF fee.

Apart from these common fees, the lender may charge other fees, such as a closing fee at the time of closing of the loan, a discharge fee if you have to discharge the lender from a collateral asset’s title and more.


The maximum amount that can be borrowed through an unsecured personal loan is usually $50,000, which is generally offered by banks. The maximum loan amount online lenders offer is typically lower, generally between $20,000 to $35,000. However, the loan amount you qualify for will depend on your unique situation. There is often a minimum amount that you can borrow, which is in the range of $500 - $5,000.

If you are getting a secured loan, the loan amount will also depend on the value of the collateral.

Repayment Term

The common repayment term lengths offered by lenders are 1 to 5 years. However, some lenders also offer repayment terms starting from 3 months and up to 7 years.

Approval Speed

If you are looking to get a loan urgently, online lenders may be your best bet, as many of them approve borrowers within a day or two. Banks and credit unions require more due diligence and can take from a few days to a few weeks to approve your loan application. Banks and credit unions also have more comprehensive application procedures compared to online lenders.

Repayment Flexibility

Repaying the loan early can save you thousands of dollars in interest; however, some lenders can charge a prepayment penalty when you pay off the loan early. Most lenders allow changes to your payment, such as changing the payment frequency, amount and due date. Be sure to ask the lender about early repayment options and the flexibility they offer.

Principal vs Interest Payment

You should ask the lender how much of your monthly payments will go towards the principal and how much of it will be used to pay the interest. Some lenders may use the entire monthly payment amount to pay off the total interest before deducting it from your principal. This could be a disadvantage if you plan to pay off the loan early, as you would still end up paying the interest for the entire term.

Lender Reputation

Verifying a lender’s genuineness and reading their reviews before getting a loan is extremely important. While banks and credit unions are highly regulated financial institutions, small lenders are free from many regulations. If a lender is pressuring you to get a loan quickly or trying to sell you a larger loan amount than you need, these can be red flags. When it comes to online lenders, you should check if they have disclosed their interest rates on the website.


Can you get a low interest rate loan with bad credit?

The interest rate lenders offer you for a loan highly depends on your credit score. Therefore, people with bad credit find it difficult to qualify for a personal loan with a low interest rate. When lenders lend money to persons with bad credit, they take on a greater risk compared to when they lend to borrowers with a good credit score, and therefore, lenders charge them a higher interest rate. However, there are a few ways borrowers with a low credit score can get a better interest rate:

  • Add a co-signer or guarantor to your application: If a person with a good credit score and financial situation signs your loan application as a co-signer or guarantor, it reduces the risk for the lender. The lender may be willing to offer you a lower interest rate in this scenario.
  • Provide collateral: If you secure the loan with an asset (collateral), the lender can seize the asset to recover their losses if you fail to repay the loan. Therefore, they may be willing to reduce the interest rate when you provide collateral.
  • Improve your credit score before applying: You can take several measures to improve your credit score before applying for a loan. This can help you qualify for a loan at a lower interest rate.

Can you get an interest-free loan in Canada?

Canadian lenders do not offer interest-free loans as they have no incentive to do so. However, some stores in Canada offer short-term interest-free loans to shop with them. For example, Home Depot offers the Home Depot Project Loan of up to $50,000 for a 0% APR for up to 6 months.

If you require to borrow some money for a very short time (<21 days), you could consider getting a credit card and paying off the balance within the grace period, which is usually 21 days. Paying off the balance within the grace period does not incur any interest charges. Meanwhile, some credit cards, such as the MBNA True Line Mastercard, also offer 0% APR for a limited time on balance transfers. If you are carrying a balance on your credit cards, you could consider transferring it to such a card to reduce the interest on the money borrowed.

Can you get a low interest loan without a credit check?

No. Lenders offer low-interest-rate loans only to borrowers with a good credit score, and it is a standard practice for lenders to run a credit check on borrowers to check their credit score and file. No credit check loans typically have a higher interest rate as the lender is taking a higher risk by not running a credit check on you.

Can I use a low interest loan for debt consolidation?

Yes. There is no restriction on how you use a low interest rate loan. You can use it for debt consolidation, making big-ticket purchases such as a car, paying bills or any other purpose that you please. If you are using the loan for debt consolidation, you should ensure that you don’t end up paying more in the long run.

The calculators and content on this page are provided for general information purposes only. WOWA does not guarantee the accuracy of information shown and is not responsible for any consequences of the use of the calculator.