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Options For Direct Private Lenders For Personal Loans in Canada

Traditional financial institutions aren’t Canadians’ only option for personal loans. Direct private lenders for personal loans in Canada and alternative lenders can offer funding available to people of various financial backgrounds. As you decide the best direction, compare and consider different sources of loans and how home equity loans can be the most beneficial.

What is a private lender? 

If you need funding options that banks and credit unions can’t deliver, a private lender may be able to accommodate your financial needs. Private lenders have more flexibility in their lending criteria and are able to lend to a larger variety of borrowers and may offer different types of loans. 

Private lenders are provincially regulated and must meet the requirements of the Canadian Consumer Protection Act. In addition, a license to lend money may be required in each province which will have specific lending guidelines lenders must abide by. 

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How do private lender loans work?

Private loans can be secured or unsecured loans. Unsecured ones are lump sums not supported by an asset that acts as collateral, while secured loans require collateral. A few types of private unsecured loans include payday loans, private auto loans, or private student loans.  

After you apply and get approved for a loan, your monthly payments towards the principal and interest start the following month. You and the lender can negotiate different payment frequencies, but the most common are monthly installments.  

Why people choose private personal loans 

A loan from the bank has stricter requirements, which is the main reason that people may look for a loan from a private lender to fund their financial goals. Below are examples of why people choose private loans over traditional bank loans.  

  • Different types of employment—if you are self-employed or have a business, banks have separate lending criteria for potential borrowers who aren’t traditionally employed. Getting a loan from a private lender may be simpler than getting one from the bank.
  • Bad credit history—your credit score plays a more significant role when applying for a loan from traditional financial institutions. However, private lenders may put less significance on your credit score and remain an available source of financing for various credit backgrounds. 
  • Urgent need for financing—the bank not only processes applications slowly and requires a fair amount of documentation, but you’ll also likely have to meet at a local branch to discuss your loan and application. Private loans can be done online, and you’ll receive your money more quickly.  

Pros and cons of private loans 

Before deciding that private loans are your best financial solution, consider a few of their characteristics. They can be a source, especially for people who have more limited options, but be prepared for possibilities such as possible high fees and interest rates.  

Pros  Cons 
  • Quick source of funding 
  • Accessible online 
  • Accommodates poor credit scores 
  • Greater flexibility in loan types 
  • Additional fees; including upfront and discharge fees 
  • Higher interest rates 

Requirements for personal loans

Even though most private lenders allow those with bad credit to borrow, they still have some of the same requirements as the bank.  

  • Low debt-to-income ratio—your debt-to-income ratio gives the lender an idea of how much of your income goes into your outstanding loans and credit charges. If you have a high ratio, private lenders may not approve a loan as high because of the potential financial stress the loan could add which may demonstrate an inability to repay the loan.

  • Steady income—rather than verifying if you have steady employment, private lenders may determine if your income is consistent enough to repay a loan from them. 
  • Age of majority—regardless of any lending institution, you have to be of legal age to obtain a loan. In most of Canada, the minimum age requirement is 18 years old.  

Private personal loan alternatives: home equity loans 

The standards for getting approved for a private personal loan aren’t as challenging as personal loans from the bank, but the terms may not be ideal. So then, many Canadians search for alternatives, like home equity loans 

A home equity loan is a type of secured personal loan that can be found from various lenders, where their value is based on how much equity you’ve built in your property. The more equity you’ve built, the more you’ll be able to borrow, and you can calculate your equity by subtracting your outstanding mortgage balance from the appraised value of your home. 

Your property secures home equity loans, so they are flexible and provide a financial opportunity for homeowners of different backgrounds. If you are self-employed with inconsistent income or have a credit score that doesn’t meet traditional lender criteria, a home equity loan can be the right solution.

What is an alternative lender?

Alternative lenders are distinct entities from the six major banks of Canada, and they generally refer to lenders that aren’t the bank. They can also be called a private lender. Traditional banks have strict eligibility requirements while other kinds of lenders have offers that aren’t ideal, alternative lenders provide a viable middle ground. The main advantage that alternative lenders offer is that they are more flexible in their approval criteria.   

Comparing home equity loans at banks vs at alternative lenders 

Home equity loans are good options for people who prefer a financial solution outside of unsecured loans. You can find home equity loans at both alternative lenders and the banks, but the requirements to getting a home equity loan is different between the two.  

Traditional banks  Alternative lenders/Private lenders 
  • Strong credit score 
  • Low debt-to-income ratio 
  • Steady employment and income 
  • Proof of homeownership 
  • Reasonable debt-to-income ratio 
  • At least 25% of equity in your home 
  • Proof of homeownership 


Other than their requirements, applying for a home equity loan from a traditional bank can be a different experience than applying for one at alternative lenders. The process is quicker with alternative lenders, and you may qualify for more than what a bank can offer, regardless of your credit score.  

Requirements for home equity loans 

Eligibility for a home equity loan has different criteria and relies mostly on your home equity rather than your financial profile.  

  • Sufficient equity—some lenders start at a minimum of 20% equity, and you can borrow more if you have more equity. You’ll need at least 25% equity in your home for Alpine Credits to be eligible for a loan.  
  • Canadian residency or citizenship—lenders prefer borrowers who plan to stay in Canada permanently.  
  • At least 18 years old—as previously mentioned, the legal age to get a loan is the age of majority, which is 18 in most provinces and territories in Canada.  

Home equity loans from Alpine Credits 

If you’re a homeowner looking for alternate financing options from private and traditional lenders, consider a home equity loan from Alpine Credits. Applying for one can be done in a few steps, and the entire process can be completed within a week or less.  

  1. Apply online—you can complete an application within a few minutes. Submitting one won’t affect your credit score. 
  2. Approval—in as little as 24 hours, you can hear back about your application. You’re eligible for approval if you own at least 25% of your home’s value. 
  3. Receive your funding—you can use the money as soon as it’s deposited into your bank account towards your goals, like debt consolidation, home renovations, or business investment.  

With Alpine Credits’ home equity financing options, you can borrow up to 75% of your home value, which can be substantially more valuable than private loans if you’ve built enough equity. Compared to private loans, you can borrow more and save on interest. 

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Frequently asked questions

Borrowing from a private or alternative lender is safe, and many of them have a reputable history. You can determine if a lender is fraudulent by looking up reviews and experiences from other people. Generally, many alternative lenders want to provide a solution fit for your financial needs. 

The lowest minimum credit score depends on the lender. Even if you have a score lower than 600, you still have financing options, such as home equity loans.

Lenders will have their own protocol regarding credit score checks, but many private lenders check credit scores to help them define a final offer. The ones that don’t check your credit score may stick to offering higher interest rates or smaller loans.

Some private loan lenders report to the credit bureaus, so the loan can reflect on your credit report, resulting in a small decrease at the start. Other lenders do not report to credit bureaus, so you won’t see a change in your score directly from the loan. If you use the money to repay other outstanding financial obligations, you may see an increase in your credit score.