Personal loans - Canada.ca - Gouvernement du Canada

 

What is a personal loan

With a personal loan, you borrow a fixed amount of money and agree to pay it back over a period of time. You must pay back the full amount, interest and any applicable fees. You do this by making regular payments, called instalments. Personal loans are also called long-term financing plans, instalment loans and consumer loans.

Personal loans are typically used for specific purchases such as home renovations, furniture and cars or to consolidate other debts with higher interest rates. Most personal loans range from $100 to $50,000 with a term between 6 and 60 months.

Personal loans are available from traditional lenders, such as banks and credit unions, as well as alternative lenders such as payday lenders, title loan companies, private lenders and pawn shops.

Your lender may offer you a loan for more than what you need. Be careful not to borrow more than you can pay back.

How personal loans work

Here’s what you can expect if you’re considering a personal loan.

What you need to provide a lender

Generally, lenders will require proof that you have:

• a regular income
• a bank account
• a permanent address

Most lenders will run a credit check when you apply for a personal loan. Your credit report helps lenders evaluate your ability to repay your personal loan. They will likely consider your debts. Your credit report, credit score and debts may affect your loan options, including your interest rate and the type of loan you qualify for.

Learn more about credit reports and credit scores.

Getting your loan from a lender

Your lender will usually give you the money for your loan in one of the following ways:

• in cash
• deposited in your bank account
• sent to you as an e-transfer
• sent to other lenders directly, if you are consolidating other debts
• on a prepaid card

If you decide to take the loan on a prepaid card, there may be a cost to activate and use the card.