Best Low-Interest Personal Loans In Canada For April 2024

We reviewed 76 popular lenders based on 17 data points in the categories of loan details, loan costs, eligibility and accessibility, customer experience and the application process. We chose the 10 best lenders based on the weighting assigned to each category:

• Loan details: 20%
• Loan cost: 25%
• Eligibility and accessibility: 30%
• Customer experience: 15%
• Application process: 10%

Within each major category, we also considered several characteristics that would benefit those with bad credit in particular, including awarding an extra five points for lenders offering a low maximum APR, a low minimum credit score, a high maximum loan term and cosigner/borrower capability. Finally, we evaluated each provider’s customer support tools, borrower perks and features that simplify the borrowing process—like prequalification options and mobile apps.

Where appropriate, we awarded partial points depending on how well a lender met each criterion.

Consider these tips when comparing low-interest personal loans:

• Prequalify, if possible. Many lenders allow you to prequalify for a loan before actually applying. To prequalify, the lender will typically ask you for basic personal and financial information and will perform a soft credit check. Based on this information, you’ll receive an estimate of the size of the loan you qualify for as well as the interest rate and terms.
• Ask about additional fees. To make sure you have a good sense of how much it will cost you to borrow, ask about fees in addition to the loan interest rate. You can ask the lender if they charge an origination fee, late payment fees or a prepayment penalty.
• Look at past reviews. Before choosing a lender, spend some time evaluating customer reviews to see if there are any major red flags. What do past and current customers say about the company’s customer service? While this might not seem like a priority, if you encounter an issue with your loan, you want to feel confident that you can get the help you need.

The interest rate on a personal loan can vary widely based on factors such as your credit score, income and debt-to-income ratio. If you’re able to secure an interest rate of 10% or less, you can consider this as low. Lenders including ATB Financial in Alberta and the Bank of Montreal offer rates  below 10%. Fusion Credit Union advertises an APR as low as 5%.

Having good credit saves you money. If you have poor credit, you’ll pay more than twice as much in interest as someone with an excellent credit score.

Lenders calculate personal loan interest rates based on a number of variables ranging from the borrower’s creditworthiness and income to the size of the loan and repayment term. Factors that can impact personal loan interest rates include:

• Credit Score: A strong credit score and credit history can help you secure a lower interest rate and save more money over time. A low credit score can make it more challenging to secure a low-interest personal loan.
• Income: Lenders will often ask for pay stubs or bank statements to confirm you have a high enough income to manage your loan. A higher income will typically result in a lower interest rate.
• Employment: Lenders tend to prefer a stable source of income, such as a salaried worker, over someone with a less stable income such as a freelancer or self-employed individual.
• Debt-to-income ratio: Your debt-to-income ratio (DTI) is the percentage of your income that goes towards paying off debt each month. A higher DTI signals a higher risk to lenders.
• Loan amount: Generally, a higher principal loan amount can result in a higher interest rate, since the lender is taking on more risk.
• Loan term: While a longer loan term can result in a lower monthly payment, it can also result in a higher interest rate and greater costs over the long term.

While personal loans are a handy way to access financing, they can be costly. In addition to repaying your loan amount, you’ll also owe interest every month—higher interest rates result in more expensive loans. This means low-interest personal loans can help reduce the total cost of your loan.

For example, let’s compare three interest rates on a 36-month, $10,000 loan to understand how rates impact the cost of a loan.

A low-interest personal loan can be a great borrowing option for the right candidate. However, there are pros and cons to consider before deciding if it’s the best option for you.

Pros

• Pay less in interest over the term of your loan
• Quick access to funds
• On-time payments can help to build credit

Cons

• Challenging to qualify without a strong credit score and income
• Increases your overall debt load
• Late or missed payments can damage your credit

If you’re looking for a low-interest personal loan, your bank is an easy place to start. However, traditional banks tend to have more eligibility requirements than some online lenders. Credit unions also offer low-interest personal loans but, you’ll need to be a member (client) to qualify. You can also look for a low-interest personal loan with an online lender.

Prequalifying with multiple lenders allows you to compare interest rates and terms and find the best option for your needs and budget.

The best rates on personal loans go to applicants who can demonstrate they’ll be able to easily repay a loan. Here’s how you can boost your odds of getting the lowest possible rate on a loan:

• Build your credit score: The personal loans with the lowest interest rates go to those with excellent credit scores because they tend to have a lower risk of default. If your goal is to save as much as you can on interest, you may want to take some time to improve your score before applying.
• Increase your income: Lenders will review your income to see if you can realistically afford to pay them back. A higher income shows you have more money to repay your debt.
• Reduce your debt: Lenders will also review your debt-to-income ratio. A lower DTI indicates that you have more money available to repay the personal loan.
• Add a co-signer: Including a co-signer or co-borrower with an excellent credit score and high income can help improve your application. Having two strong borrowers can reduce the risk to the lender. However, if you fail to repay your loan, your co-signer or co-borrower is on the hook to make the payment.
  Related: Best Personal Loans With A Co-signer
• Prequalify with multiple lenders: Many lenders allow you to prequalify to see the interest rate and terms you’re likely to get. Prequalifying with multiple lenders allows you to find the lowest interest rate.
• Only apply for what you need: Lenders want to see that you can manage your repayments. Even if you qualify for a higher loan, it’s best to only take on what you need. Taking on a smaller loan means there’s less to pay back.
• Opt for the shortest term possible: While a shorter term results in higher monthly payments, you’ll pay less in interest over time. Shorter terms are also seen as less risky to lenders which can help to lower your interest rate.

While the process varies by lender, follow these general steps to apply for a personal loan:

1. 1. Decide how big of a loan you need: Before you apply for a personal loan, run your numbers to see how big of a loan you really need.
2. 2. Review your credit report: This can help you determine if you meet the credit score qualification criteria. Reviewing your report is also a good way to identify if there are any errors, and gives you time to fix them before you apply for a personal loan. You can request a free copy of your credit report from Equifax or TransUnion.
3. 3. Improve your credit score, if needed: If your credit score doesn’t meet the lender’s criteria, consider taking time to improve your score. This can help you qualify for the lowest interest rate and can save you more money. To boost your score quickly, focus on paying your bills on time, and try to keep your credit utilization low.
4. 4. Comparison shop: When you feel comfortable with your credit score, start comparing lenders. See if you can prequalify to get a better idea of the interest rate and terms.
5. 5. Fill out an application: Once you’ve selected a lender, it’s time to apply. You can submit your application in person or online.

How to Get Low-interest Personal Loans With Bad Credit

If you have a bad credit score (a FICO Score of 579 and below), you may find it challenging to qualify for a low-interest personal loan. Generally, you’ll need an excellent credit score and a high income to secure the lowest interest rate.

To improve your chances of qualifying for a personal loan with a lower interest rate, take time to increase your credit score, boost your income and reduce your high-interest debt.

If you need to borrow money to consolidate debt or make other purchases, a low-interest personal loan is one of the best tools for the job. However, if it doesn’t seem right for your situation, consider other alternatives.

1. 1. Credit Card: The benefit of using a credit card is you only borrow money as you need it, and you only pay interest on the money you use. However, credit cards typically carry a higher interest rate than a personal loan. Your best bet is to find a credit card that offers a low introductory interest rate. Then aim to pay off your balance before the intro period ends.
2. 2. Home Equity Line of Credit (HELOC): If you’re a homeowner, you might consider using a HELOC. HELOCs often come with a lower interest rate than other forms of credit such as credit cards or unsecured loans. Like a credit card, you only have to pay interest on the amount you borrow. The major downside of a HELOC is you risk losing your home if you miss your payments.
3. 3. Home Equity Loan: This is similar to a HELOC in that you can borrow against the equity you’ve built in your home. However, a home equity loan offers a lump sum payment. Home equity loans often come with lower interest rates than other borrowing options but, like a HELOC, you risk losing your home if you miss payments.
4. 4. Family and friends: You can also consider approaching a family member or friend who is willing and able to loan you money. The benefit of borrowing from someone you know is they often won’t charge you interest or may charge you a low rate. The major drawback is you risk straining or ruining an important relationship if you fail to repay the money or run into complications.