Best Personal Loans In Ontario For May 2024

We reviewed 20 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 five best lenders based on the weighting assigned to each category:

• Loan details: 20%
• Loan cost: 35%
• Eligibility and accessibility: 20%
• 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.

If you are hoping to get a fair, low-interest personal loan in Ontario, there are a number of different lenders to consider, including banks, credit unions, online lenders and peer-to-peer lenders (which are online services that match lenders to borrowers). Below we break down the pros and cons for each lender type, so you can make your decision with the most information possible.

Banks

Pros

• Trusted institutions
• Medium-to-fair interest rates
• Consumer protections and regulations in place
• High lending amounts
• Variety of loan types

Cons

• Stringent eligibility requirements
• Potentially long approval process
• High income and credit score requirements
• Usually require in-person appointments

Related: Best Banks For Personal Loans

Credit Unions

Pros

• Moderate eligibility requirements
• Moderate lending amounts offered
• Governed by provincial legislation and regulations
• Flexible repayment terms
• Fair interest rates

Cons

• Not available nationwide
• Usually require in-person appointments
• Somewhat slower loan approval
• May be required to a pay a membership fee
• Fewer options for consumers with low credit scores

Online Lenders

Pros

• Quick turnaround times
• Convenient application process
• Large variety of lenders to choose from
• More receptive to borrowers with poor credit
• Large array of loan amounts offered

Cons

• High interest rates and fees for consumers with poor credit
• No in-person guidance
• Greater potential for fraud or predatory lending
• Less regulation and consumer protection than big banks
• Greater potential for additional hidden fees

Peer-to-Peer Lenders

Pros

• High return for investors
• Interest rates usually low due to market competition
• More accessible source of funding for consumers
• Options available for poor credit consumers

Cons

• Limited lending platforms
• High risk for fraud or predatory lending activity
• Little-to-no consumer protection
• Not available in all jurisdictions

How much money you need to borrow, and for how long, will factor in to deciding the right kind of personal loan for you. Below is a detailed breakdown of each personal loan type offered in Ontario.

Unsecured vs Secured Loans

Related: Secured Vs. Unsecured Personal Loans

Fixed vs Variable-Rate Loans

Generally, a successful personal loan application requires you to meet certain criteria.

Eligibility Criteria

• Must be the age of majority in Ontario (18 years old)
• Must be a Canadian citizen or a permanent resident with a valid physical address
• Must be employed with a steady income
• Must have a bank account
• Must meet lender-specific credit score and income requirements
• Must meet lender-specific debt-to-income ratio requirements

Debt-to-Income Ratio (DTI)

A key factor lenders use when evaluating your eligibility is your debt-to-income ratio (DTI), which is the ratio of all your debts divided by your gross monthly income. For example, if your gross income before taxes and EI or CPP deductions is $5,000 and you have $2,500 in monthly debts and expenses, your DTI would be 50%. Lenders generally prefer borrowers with a DTI of 42% or less overall.

Documents Required for Application

• To apply for a personal loan in Ontario, you may be required to provide the following documents and information:
• Proof of regular income through paystubs, employment records or notice of assessment
• Personal identification such as a driver’s licence or passport
• A list of your debts and assets to calculate your debt-to-income ratio
• Mortgage or rent verification and a permanent address

When comparing various personal loans from lenders across the province, keep an eye out for these key details:

• Turnaround time: If you need funds fast, it might be worth narrowing your search to strictly online loans, as these generally have the fastest turnaround time.
• Extra fees: Not all fees are created equal. Some personal loans post interest rates that include just the interest and no other costs, meaning you’ll need to look closely to find other hidden fees. Some lenders may bundle their interest rate and fees, resulting in a ratio called an Annual Percentage Rate (APR). Keep an eye out for these terms.
• Loan amounts: Though some lenders may have minimal credit score requirements, or none at all, they may only offer low loan amounts that don’t give you the financial leg-up you need. Make sure to review the maximum loan amount a lender can supply.

Here are a number of steps you should take when applying for a personal loan in Ontario. Doing so will help ensure you are both well-prepared and putting your best foot forward with lenders.

• Prepare a budget: Review your financial situation and make sure you can take on additional debt with some wiggle-room in case an emergency comes up. Taking on additional debt without knowing if you can meet every monthly payment is a situation you want to avoid.
• Compare lenders: Rather than choosing the first lender you find from an online search, compare multiple lender’s rates, eligibility criteria, type of personal loans offered and more, to get a comprehensive picture of what kind of loan agreement you are signing up for.
• Prequalify: In some cases, a lender’s posted rate—the rate they advertise on their site—may be much lower than the rate they offer you once they see your credit history. Taking the time to prequalify for multiple loans can give you a more accurate range of interest rates you can expect to pay.
• Complete the application: Once you’ve found a lender you want to proceed with, make sure to properly fill out the application and provide contact details and other personal information as required. If you’re applying for an online personal loan rather than a traditional loan, this process can be done entirely online.

Related: Personal Loan Requirements to Know Before Applying

Across the top lenders Forbes Advisor Canada surveyed, interest rates for personal loans in Ontario ranged anywhere from 5% to 47% annually. The overall cost of a personal loan can depend on a variety of factors, including:

• Credit score. The higher your credit score, the lower risk you incur to lenders, meaning they are more willing to give you a lower interest rate.
• Collateral: If you choose to opt for a secured loan by offering an asset as collateral, lenders will usually offer lower rates as their funds are more secure. Keep in mind that if you default on a secured loan, the lender could seize the asset(s) you put up as collateral.
• Debt-to-income ratio (DTI): Having a lower DTI means your monthly income can easily cover your outstanding debts, making you look like a reliable investment opportunity for banks and other lenders.
• Other fees: Some lenders may charge additional fees not captured in the interest rate shown. Make sure to read your contract closely to find any other fees, such as late payment or loan insurance costs.

Under Canada’s current Criminal Code, any lender in Canada cannot charge more than 60% annually in interest on any personal loans lent out—including Ontario. However, extremely high-cost loans such as payday loans, are outside of these federal laws pursuant to an amendment made to the Code in 2007—making them a potentially dangerous financial trap for consumers. Ontario currently regulates maximum payday loan fees at a rate of $15 in interest for every $100 loaned. According to the Financial Consumer Agency of Canada, a payday loan with costs of $17 per $100 loaned, on a two-week period, has a staggering annual interest rate of 442%.

But, high-cost credit legislation may be primed for a shift in favour of consumers.

On December 23, 2023, the federal government published Part I of its proposed regulations to amend Section 347 of the Criminal Code that deals with interest rates set by lenders, that sought comments from the public and stakeholders until January 22, 2024. Major proposed changes include lowering the maximum interest rate lenders can charge across Canada to a 35% annual percentage rate (APR)—rather than 60% effective annually equivalent to 48% APR. APRs include all possible fees in their calculation, not just the interest rate itself, but the exact calculation can be extremely complex.

The draft regulations also take aim at payday loans, proposing to set a national payday loan maximum interest rate of $14 of every $100 borrowed. Currently, payday loans are regulated on a provincial level, with costs varying from $14 per $100 loan up to $17 per $100 loan.

Though no hard timeline has been set, the proposed changes are set to take effect three months after publication of Part II of the proposed regulations in the Canada Gazette.

Though many lenders offer personal loans with little-to-no approval requirements, getting the lowest interest rates might require a bit of elbow grease. Here are some strategic ways you can increase your chances of getting approved with even the most stringent of lenders.

• Improve your debt-toincome Ratio (DTI): Your debt-to-income ratio is the percentage of your monthly income that goes towards paying off any debts. This ratio is reviewed by lenders to determine how likely it is you can afford interest payments on the loan you are applying for. Reducing your DTI by paying down debts—or increasing your income—shows potential lenders you have the ability to take on additional debt with less risk to them.
• Bump up your credit score: Your credit score, in conjunction with your credit report, is arguably the most important factor when applying for a personal loan—lenders use this three-digit figure to determine how you handle debt. The higher your score, the more reliable you are with paying back creditors. Paying bills on time, keeping your credit card balance low and not applying for multiple loans in a short period of time, are all ways you can increase your credit score.
• Get a co-signer: A co-signer is someone who signs a personal loan agreement with you, promising that they will pay off the loan in the event you default on payments. In the event you are unable to qualify for a personal loan, a co-signer can use their credit score and creditworthiness to bolster a lender’s trust in your ability to pay back their debt. Finding a friend or family member with a strong credit score can help you qualify for personal loans thay may be out of your reach otherwise, but they do come with potential risks to the co-signer. Make sure to discuss these details with your co-signer beforehand.

Related: Best Personal Loans With A Co-signer

Personal loans can impact your credit score in both the long-term and the short-term.

When you apply for a personal loan some lenders may do a hard inquiry on your credit score. This means the lender reviews your credit score as a part of their loan application process, and their inquiry then shows up on your credit report for up to two years. Hard inquiries do negatively impact your credit score, but not dramatically—any repercussions from a hard inquiry typically only affect your credit score for one year.

In the long-term, a personal loan can positively or negatively affect your credit score, depending on whether you abide by the terms of your financing agreement. Consumers that pay their monthly payments on time can boost their credit worthiness and highlight to other lenders their reliability when it comes to paying off debt. These characteristics will be positively reflected in their credit score.

If a borrower defaults on a loan, or misses multiple payments, their credit score could be tarnished rapidly. While there is a reward for responsible borrowing, there are also large risks to be cognizant of if you can’t handle your debt

If you are struggling to find a personal loan with terms that agree with your financial situation, here are some public programs in Ontario that you could be eligible for:

• Ontario Works: If you need assistance with keeping or finding a job, funds for housing or food or are in general financial need, Ontario Works could give you up to $733 per month.
• Ontario Disability Support Program: If you fall under Ontario’s definition of a disabled individual, the Ontario Disability Support Program may supply you with funds for living expenses (up to $1,308 per month), health benefits and employment support.
• Ontario Emergency Assistance: Individuals fleeing a crisis or encountering an emergency situation can apply for Ontario Emergency Assistance, which offers Ontario residents up to $733 per month for up to 48 days to help them get out of a harmful situation.

You can also look at other types of private lending options such as:

• Credit cards
• Asking family for financial support
• Lines of credit