Personal Loans with Bad Credit in Canada: What to Know First
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With a low credit score you can still borrow, but it will cost more, and the companies most eager to lend to you are often the most expensive. Know the total cost before you sign.
Your options, cheapest first
- Your own bank or credit union. If you have an account history there, ask first, even with a low score.
- A secured loan or line of credit. Backed by savings, a GIC or a vehicle. Lower rate, but you can lose the asset if you don’t pay.
- A co-signer. A person with good credit agrees to pay if you don’t. It’s a serious commitment for them.
- Alternative (subprime) lenders. Online lenders that approve lower scores at higher rates. A comparison service lets you see several offers with one form.
- Payday loans. The most expensive option. Use only as a true last resort.
Look at the APR and the total cost
The APR (annual percentage rate) includes interest and most fees, so it’s the number to compare. Then ask for the total cost of borrowing: the dollars you’ll pay back on top of what you borrow. Lenders must disclose it before you sign.
| Loan | APR | Term | Approx. total interest |
|---|---|---|---|
| $5,000 | 10% | 3 years | ~$810 |
| $5,000 | 25% | 3 years | ~$2,160 |
| $5,000 | 34% | 3 years | ~$3,040 |
The legal limit
Since January 1, 2025, Canada’s Criminal Code caps the APR on most consumer loans at 35%. Payday loans have their own federal cap of $14 per $100 borrowed, plus provincial rules. A legal loan can still be very expensive: 34% is legal.
Red flags of a loan scam
- An upfront fee “for insurance” or “to guarantee approval” before you get the money. Legitimate lenders take fees out of the loan or include them in the payments; they don’t ask for a gift card or e-Transfer first.
- “Guaranteed approval, no credit check” for a large amount.
- No physical address or provincial licence where your province requires one.
If loans are covering other debts
If you’re borrowing to keep up with other payments, talk to a non-profit credit counsellor first. They can help with a budget or a debt management plan, and they explain consumer proposals, often for free. Check that the agency is a registered non-profit.