When you need to borrow money, a personal loan can be a safe and less expensive way to gain the needed funds. While these loans vary in terms and interest rates from one lender to another, they usually come with rates lower than other lending products, such as credit cards.
If your credit rating is good, you won’t find it difficult to apply for low-interest loans, which are typically offered to borrowers with good payment history. In this article, we’ll enumerate the best low-interest loans in Canada, how to apply and qualify for them, and their pros and cons.
What is a Low-Interest Loan?
A low-interest loan is a loan with below-average market interest rates that allow borrowers to pay less over the term of a loan. Loans with low interest used to be found only in banks and credit unions. However, alternative lenders are becoming more competitive.
Online banks can offer low-interest loans due to factors like lower overhead costs, streamlined and automated loan processes, the ability to leverage technology to optimize their operations, and access to alternative sources of funding, such as peer-to-peer lending platforms.
Although banks directly offer low-interest loans, there are other things you can do to lower your personal loan interest. These include the following:
- Adding collateral. Collateral minimizes the lender’s risk, so when you offer an asset as a guarantee for your personal loan, the lender will typically be more open to offering a low-interest loan.
- Find a co-signer. Having a co-signer for your personal loan increases your prospects of getting a low-interest personal loan. The reason is banks see a co-signer as added insurance that you’ll pay your loan.
- Improve your credit score. Credit scores are crucial when seeking a loan. Banks look at credit scores when you apply for a loan. When your credit score is higher, you’ll be more eligible for loans with low interest.
Low-Interest Loans in Canada
Loans Canada
Loans Canada is a loan search platform and comparison website where you can compare personal loans from various lenders. Loans range from $500 to $50,000, with terms of 3 to 6 months or longer. Depending on the borrower’s credit profile, APRs range from 6.99% to 46.96%.
Learn more here.
Loans Canada
Loans Canada is a loans comparison website for various types of loans, including personal loans, car loans, bad credit loans, and debt consolidation loans.
Interest rates: 2.99% to 46.96%.
Loan term: 4-60 months.
Loan amount: $500 to $35,000.
LoanConnect
LoanConnect is an online platform that uses technology to match borrowers with suitable lenders. It offers fast pre-approvals of loans between $500-$50,000, with APRs from 8.99%-46.96% and terms from 3-120 months. A minimum credit score of 300 is required.
LoanConnect
LoanConnect is a loan search engine that connects borrowers with multiple lenders in one place. This platform is free to use, and you can use it to find online loans regardless of your credit score.
Interest rates: 4.99% – 46.96%.
Loan term: 3-120 months.
Loan amount: $1,000 to $35,000.
CarsFast
Carsfast is an online comparison website that lets you access numerous financing options from multiple lenders. It offers quick pre-approval and requires no collateral. Loan amounts range from $500 to $7,500, with loan terms of 12 to 96 months and APRs ranging from 3.90% to 29.90%.
FatCatLoans
FatCatLoans.ca is an online platform that also matches borrower applications with lenders in its network. Loan amounts are from $300-$50,000, with rates from 4.84%-35.99% APR and terms from 3-84 months. All credit histories are welcome and no paperwork is required.
Mogo
Mogo is a fintech company offering personal loans, where you can get your line of credit pre-approval in minutes. Loans range from $300-$35,000 and terms are from 6-60 months. Their loans have a 100-day money-back guarantee if you’re unsatisfied with their service.
National Bank
National Bank offers personal loans with fixed or variable rates. The bank adjusts personal loan rates according to your credit history and the authorized loan amount. Payment terms are flexble and you can pay off your loand without charges.
Average Interest Rate for a Personal Loan in Canada
The average interest rate for a personal loan in Canada depends on factors like your credit score and income-to-debt ratio. If you have good or excellent credit, your loan interest rate would be significantly lower than a borrower with poor credit.
Borrowers with excellent credit can enjoy an interest rate of less than 10%, while someone with poor credit can get interest rates of over 40% on a personal loan. In Ontario, the maximum interest rate on loans is 60%.
How to Apply and Qualify for a Low-Interest Loan
To qualify for a low-interest loan, you need to have a good to excellent credit score, with a debt-to-income ratio of not more than 40%. Below are the typical steps to take when applying for a low-interest loan online:
- Do research for the right lender by comparing loan features, terms, amounts, and interest rates. Choose the one that offers what you need.
- Fill out the online application form. Provide the required personal and employment details and other necessary information.
- Submit the requisite documents and other data the lender asks for.
- Receive your loan contract and review it thoroughly. If you’re satisfied, sign the document.
- Wait for your lender to release the funds to you.
- Make your loan payments on time.
Pros and Cons of Low-Interest Loans
The following are the pros and cons of getting low-interest loans, specifically from online lenders:
Pros:
- Quick application
- Lower interest rates than other loan products
- One lump sum
- Fast fund release
- No collateral needed
- Improves borrowers’ overall financial health
- Easier to manage
Cons:
- Low-interest loans are not the cheapest
- Eligibility requirements are more stringent
- Fees and penalties can be costly
- Can harm your credit score
How to Choose the Best Low-Interest Loan in Canada
Choosing the best low-interest loan in Canada typically involves the following steps:
- Obtain a copy of your credit report and score from a credit bureau.
- Research lenders that offer personal loans and obtain quotes.
- Compare their interest rates, fees and charges, and repayment terms to find the ideal one.
- Review the terms and conditions each lender provides. Check for hidden fees or conditions that can impact the cost or terms of the loan.
- Evaluate the quality of customer service that each lender provides by looking up review sites.
- Seek recommendations from your financial advisors, family or friends who have prior experience with personal loans in Canada.
More details:
Can we get interest-free loans in Canada?
There are genuinely no interest-free loans offered by traditional lenders in Canada. Some entities though, such as the Government of Canada, offer interest-free loans for students, small businesses or not-for-profits.
How can I get the lowest personal loan interest rate?
If you have a high credit score, one way to get the lowest loan interest rate is to choose shorter loan terms. The higher your score, the more favourable your terms will be since lenders perceive you as creditworthy and less risky.
What is the easiest bank to get a loan in Canada?
Credit unions, smaller community banks and online lenders are often easier to get a loan from due to the less-than-stringent requirements, particularly for borrowers with no good credit.
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