Best Private Lenders For Personal Loans In Canada For May 2024

We reviewed 82 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.

Private lenders are companies or individuals that lend out funds to borrowers as an alternative to regulated institutions like banks and credit unions. These lenders may or may not be associated with a financial institution or public body, and as such, have more flexibility in who they offer loans to. While these entities have broader audiences to offer their products to, the loans they offer typically come with much higher interest rates and fees to reflect the risk they take on by lending funds to individuals with poor credit. In a sense, consumers that use private lenders are trading accessible and fast access to liquidity for higher rates and public lenders.

Sure, private lenders come with higher fees, but some also bring benefits to the table you might not have access to with other lender types.

• Low eligibility bar. Consumers that cannot get approved for a loan through more traditional means can easily find approval through a private lender, many of which require no credit history whatsoever to qualify.
• Quick approval and funding. Private lenders typically have quick approval and turnaround times for lenders, allowing them to access funds quickly instead of having to book an appointment, for instance.
• Highly convenient. With some traditional loans requiring in-person appointments or online meetings, private loans are nearly always completed online.

Generally speaking, most private lenders that are reputable are easily found online. However, finding a private lender is the simple step, verifying them and confirming they are a reputable vendor is more important—and more time-consuming.

If you are researching on your own, however, be sure to watch for a number of key factors that highlight a respected private lender.

• Approved with the Canadian Lenders Association (CLA): Private lenders that have the stamp of approval from the CLA, meaning they have met rigorous criteria and do not participate in payday lending schemes.
• Have Better Business Bureau (BBB) Accreditation: The BBB vets businesses that seek to become accredited with them. Lenders that have BBB accreditation meet the BBB’s high standards and approval from their board of directors—they also must pay an annual fee, which highlights that lender’s commitment to putting their best foot forward with consumers.
• Have Awards and positive reviews: If a private lender has improper lending practices, their customer reviews will highlight this immediately. Private lenders, including some we surveyed, have won awards or recognitions for their work in the lending space that highlights their commitment to good lending practices.

The interest rates for personal loans from private lenders varies between 6% and 46%, up to a maximum of 60% (including all fees) as per the Financial Consumer Agency of Canada. The exact rate you can expect will depend on a number of factors such as your debt-to-income ratio, credit history, income level and whether the loan will be secured by some type of collateral.

In addition to interest, private lenders typically charge other fees that public lenders may not. These include origination fees, administrative fees, prepayment penalties and fees associated with secured personal loans—though this may vary depending on your province. On the other hand, someprivate lenders have little-to-no additional fees whatsoever. Make sure to research your lender meticulously to understand their fee structure before deciding to borrow funds.

In order to apply for a personal loan, you will need to meet the following requirements:

• Be the age of majority in your province or territory
• Be a Canadian citizen or permanent resident
• Have a valid Canadian address
• Have a source of steady income
• Meet credit and income requirements, where applicable

In addition, you will also need to provide the following documentation:

• Valid government-issued ID
• Proof of income (i.e. paystub)
• Proof of permanent address
• Proof of bank account ownership

There are a number of key distinctions between bank loans and private loans borrowers should be aware of.

Banks

Pros

• Competitive interest rates
• Established and well-known entities
• Regulated federally by the Office of the Superintendent of FInancial Institutions (OSFI)

Cons

• Slower timelines for funding
• Strict lending requirements
• May require in-person appointments

Private Lenders

Pros

• Quick turnaround times for funding
• Attainable eligibility requirements
• Entirely online in most cases

Cons

• High interest rates
• Potential for additional fees
• Private lending space has predatory lending entities

Private lenders across Canada offer various loan types, all with their own terms and conditions. Below are the most common loan types you may be offered through a private lender.

Private Mortgages

Private mortgages are typically short-term loans offered by private syndications, independent lenders or individuals used to purchase a home. Because these loans are generally short-term, their amortization periods last anywhere from six months to three years. Private mortgages are funding options for borrowers that are unable to qualify for funding through traditional banks or public lenders, but they will come with much higher rates and are generally interest-only—meaning your payments only go towards interest until the term is up, not the principal amount. Additionally, private lenders may give you a mortgage value based on the value of your property rather than your income.

It is important to remember that private mortgages should be viewed as temporary solutions for your housing situation. Individuals or families utilizing a private mortgage program should make sure they have a clear, achievable exit strategy before signing a loan agreement.

Private Auto Loans

Rather than lease a vehicle through a dealership, consumers can turn to private loans to finance their purchase of a vehicle outrights—and end up owning the vehicle at the end of their term. These loans typically come with an installment plan to pay back the funds borrowed over a specified time period.

Private Student Loans

Students that are seeking funds for post-secondary education may not be eligible for direct funding from the provincial or federal government. In these cases, students can turn to private lenders to fund their education. Depending on the terms of the loan, students will receive their funds in two equal installments, typically sent to the university or college they are studying at. Any leftover amounts will be credited back to them.

Note that private student loans do not come with the possibility of grants like public loans do, unless you have an arrangement with a family member, for example. In many cases, it is better to look into financial aid programs offered through a university or college before seeking a private student loan.

Personal Installment Loans

A personal installment loan is a loan where a borrower receives a set amount of funds from a private lender and agrees to repay it over time through a series of set, regular payments. Unlike a line of credit or other revolving loans, installment loans have a fixed payment schedule and a set end date.

Each installment amount will include a portion of the principal borrowed, as well as interest and other applicable fees. Note that installment loans can be either secured or unsecured, depending on the lender and the terms of the loan arrangement.

A number of private lenders Forbes Advisor Canada surveyed offered personal loans to borrowers with no credit history, or a less than excellent score. However, borrowers that have a poor credit score can expect to pay higher interest rates than those with a better history—or consumers that opt for a secured loan rather than an unsecured one. This is due to the risk lenders incur by lending funds to borrowers that have an arguably higher chance of defaulting on a loan given their credit history.

To try and offset these higher fees, consider getting a co-signer to bolster your credit history or choose a secured loan option and put up an asset as collateral to lower your rate. Take care to remember that any assets put up as collateral may be seized if you default on your payments.

Who should get private personal loans in Canada?

Private personal loans are admittedly a niche product not designed for all consumers. But, there are a number of situations that might require them, such as:
If you can’t get approved by major lenders: Individuals that have been turned down by big banks or other public lenders will have a better chance of getting a personal loan through a private lender, in most cases.

• If you need funds quickly: Private loans generally have expedient turnaround times, with many vendors offering same-day fund deposits into your account. If you need funds quickly—as opposed to setting up an appointment with a bank—private loans are an option.
• If you can handle the repayment terms: Private loans for quick-cash can come with very short repayment periods coupled with high interest rates. Even if you are eligible for a private loan, do some calculations to make sure you can cover the repayment costs.
• If you can research vendors well: The private lending space is unfortunately home to nefarious corporations with predatory lending tactics. If you are going to take out a private loan, make sure you do a comprehensive background check on the lender first.