Personal Loans Toronto

Updated on July 3, 2024

Online lenders offer two kinds of personal loans: secured loans and unsecured loans. The most common kind of secured personal loans are auto loans or mortgages, where the asset in question serves as collateral to ensure that you’ll pay back the lender.

Unsecured personal loans don’t require any collateral, which means that lenders typically have more strict requirements for credit scores and often also have higher interest rates.

Personal loans, whether secured or unsecured, can be used for various purposes, including debt consolidation, covering emergency expenses, home repair, building credit, and more.

What is needed for a personal loan application?

Each lender will have their own specific criteria, but there are some general requirements:

  • Having a permanent address demonstrating Canadian residency
  • Being at least 18 years old
  • Having a regular income and employment history
  • Having a Canadian bank account
  • Having a credit history of at least one year

Most lenders will review your credit score and credit history to ensure that you’ll be able to pay back the loan.

What credit score do you need for a personal loan?

Credit scores range from 300 to 900, with higher scores indicating a better credit history. The higher your credit score, the more likely you are to be approved for a loan with a low interest rate. In general, scores above 660 will have the best chance of approval.

However, there are still options out there for people whose credit score is below 660. It’s a good idea to use one of the free credit check tools available online to understand your credit score and credit history before you look for a lender.

How will getting a personal loan affect my credit score?

One important factor in your credit score is your payment history, so taking out a loan and making on-time payments can improve your credit score in the long run, as long as your loan is reported to the credit bureaus. Not missing any payments and repaying the loan in full will help rebuild your credit score. The opposite is also true. Missing payments or defaulting on the loan will damage your credit score a lot. So, make sure you have the means to pay the loan back before applying.

Why do personal loan applications get rejected?

There are several common reasons that people get denied when they apply for a loan. Some of these are simple errors, such as providing incorrect bank info or work information. These are easily fixed, but there are other reasons that result in rejection as well:

  • credit score is too low
  • not enough credit history
  • too many missed bill payments
  • a bankruptcy on record
  • too much debt relative to income

These factors may result in a rejection because the lender does not believe you’ll be able to repay the loan.

How much money can I get with a personal loan?

Personal loans in Toronto can range from just $500 up to $35,000, but the amount that you’ll receive depends on the lender and on your financial situation, including your credit score, income, current amount of debt, and whether you’re seeking a secured or unsecured loan.

What can I use the funds from a personal loan for?

With an unsecured personal loan, there are really no limitations on how you use the funds you receive. Some of the most common uses for a personal loan include

  • consolidating credit card debt
  • home renovations
  • vacation funds
  • emergency expenses
  • vehicle repairs

How will lenders determine if I’m qualified for a personal loan?

The application process for a personal loan is simple. You’ll need to provide some basic information, such as your personal information, income, and bank details. The lender will then check your credit score and history to determine whether you meet at least their minimum requirements. If you do, they’ll provide you with an offer for a specific amount, along with the loan details, including interest rate, repayment schedule, and any other fees.

How do lenders determine the interest rate for a personal loan?

When you get a loan from a lender, you’ll be given an interest rate, which is the additional amount you’ll pay for borrowing that money. Interest rates can be calculated in different ways, either daily, monthly, or annually. The most common way you’ll see interest represented is as an annual percentage rate, or APR. This is the amount of interest you’ll pay over the course of a year.

What’s the difference between a fixed and a variable interest rate?

If your loan has a fixed interest rate, that means interest will be calculated at the same percentage throughout the length of your loan. A variable interest rate means that the lender can adjust the percentage, typically based on market conditions, during the lifetime of your loan.

Variable rates can be good if it’s likely that interest rates will go down over your loan term. However, you’re also risking paying more if rates increase. A fixed-rate loan locks in your interest rate, so you’ll be able to know exactly how much you’ll pay over the entire course of your loan.

How long are personal loan terms?

The length of a personal loan depends on the lender and the size of the loan. Lenders in Canada usually offer 3-year and 5-year terms. In general, a shorter term is better because you’ll pay less interest overall. It’s important to account for interest when determining how much you will borrow and what term you’ll accept.

How quickly can I get approved for a personal loan?

With online applications, the approval process is normally fairly fast, and you’ll hear back within 1-2 business days. If the lender needs to verify something, such as your banking details or employment information, it may take a little longer.

How do I repay my personal loan?

Your loan agreement will specify the repayment terms. Typically, you’ll make either a monthly or biweekly payment, and you can easily set up automatic payments.

Are there no credit check personal loans?

Several online lenders cater specifically to borrowers with bad credit. These non-traditional lenders consider factors beyond your credit score, such as your income and bank account status.

While traditional lenders typically require a credit check, these specialized lenders offer “no credit check personal loans.” These are essentially bad credit personal loans requiring you to meet other lending criteria to make up for the lack of a credit check.

It’s important to find a reliable bad credit lender who can offer reasonable terms and ensure that you meet their specific requirements. This approach can provide a solid financial solution for those who might otherwise struggle to secure a loan the traditional way. 

Is it possible to get a co-signer for a personal loan?

A co-signer is someone who agrees to take on the responsibility of repaying the loan if you are unable to do so. This can be especially beneficial for borrowers with bad credit who still need to take out a loan, as having a co-signer with a good credit history can increase your chances of getting Toronto personal loans approved.

A co-signer differs from a co-borrower in that a co-signer does not have access to the loan funds or share in the responsibility of managing the loan. Instead, the co-signer’s role is to provide additional security for the lender by guaranteeing repayment if the primary borrower defaults.

On the other hand, a co-borrower is a partner applicant on a joint personal loan and shares equal responsibility for repayment, as well as access to the loan funds and payment information.

Lenders may be more willing to allow a co-signer to be added to your personal loan if you have an established relationship with them. Just remember that if you can’t keep up with your loan payments, your co-signer will be required to take over, potentially affecting their credit.

Can I get a personal loan for debt consolidation?

Using Toronto personal loans for debt consolidation can be smart move because personal loans often have lower interest rates compared to credit cards or other high-interest debt. Debt consolidation combines multiple debts into a single loan with one monthly payment.

By consolidating your debts into one loan, you can save money on interest because of the lower interest rate, as well as reduce the number of payments you need to make each month to make your debt more manageable.

That being said, it’s advisable to use personal loans for debt consolidation with caution. Find the best personal loans with favourable terms and monthly payments you can afford.

If not managed carefully, you could end up in more debt. Always review your budget and financial situation before deciding to consolidate your debts with a personal loan.

How do I know if a Toronto lender is legit?

Applying for Toronto personal loans from reputable online lenders is just as secure as getting one from a bank. You can trust an online lender to check your credit, disclose the loan amount transparently, and assess your repayment ability.

Check if the lender is registered and licensed to operate in Toronto. You can also look for reviews and testimonials from other borrowers. Additionally, a credible lender will have clear contact info, a physical address, and detailed terms on their website. 

Avoid lenders who don’t provide key details or who pressure you into making quick decisions. Taking these precautions can help ensure you’re dealing with a legitimate online lender in Toronto.