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Guide to low interest loans in Canada

Exploring Canada’s various low-interest loans is the way to go if you want to save on interest charges and manage your finances efficiently. 

Low interest rate loans

Low interest loans are loans with below-average market interest rates. With low interest loans, borrowers often pay less over the loan’s lifespan, which is crucial for significant purchases like a car or a home. 

For personal loans, the lowest interest rates are often found with banks and credit unions, but alternative lenders are increasingly becoming more competitive. While it can be hard to navigate the options, this can spell more choices for borrowers to find a lender that works for them. 

  • Banks: With traditional banks, borrowers can expect reliability and various financial products that suit the borrower’s needs. Loans are assessed on a case-by-case basis on multiple factors, including your bank account history, the number of products you have with them, your job and income history and your credit score. Since they are large institutions, funding can be slow, not to mention the stringent requirements of a high credit score and low debt service ratio. 
  • Alternative lenders: Many alternative and online lenders now offer loans with low interest rates. While they might consider your credit history, they can be more lenient than traditional banks. 

For example, Alpine Credits offers home equity loans for Canadian homeowners. With home equity as the primary consideration for their process, Alpine Credits can provide funding faster, covering a variety of financial needs. 

A lender processing a client's application

What types of loans have low interest rates in Canada? 

Before we go into the types of low interest loans, it is important to know the difference between a secured and unsecured loan, as that can influence the interest rate you will get. The main difference between the two is that secured loans are secured against your assets (collateral), while unsecured loans are not. 

Secured Loans  Unsecured Loans 
Lower interest rate 

Longer term lengths 

Higher borrowing limits 

Longer approval 

Higher interest rate 

Shorter term lengths 

Lower borrowing limits 

Faster approval 

While most personal loans are unsecured, leading to a higher interest rate, you can still get an unsecured personal loan with a low-interest rate, depending on the lender’s requirements. Generally, a good credit score (above 700) can give you access to a lower interest rate. 

Here are a few types of low-interest loans you can take advantage of: 

  • Secured personal loans: Since these involve collateral, lenders see borrowers as less risky, hence the lower interest rates. With a personal loan, lenders provide a lump sum that borrowers repay over time. A secured personal loan also features a fixed term, with 6 to 60-month loan payments. 
  • Home equity line of credit (HELOC): A HELOC works like a credit card. But unlike credit cards, HELOCs are secured against the equity value of your home. Borrowers are given a limit that they can borrow from within a draw period (usually 10-20 years).  
  • Home equity loan: Home equity is the current value of your home less the outstanding mortgage amount. Leveraging your home equity can be the best way to access some equity from your home without selling it. Since this is a secured loan, a home equity loan can come with lower interest rates. With the loan amount and interest fixed, a home equity loan will also allow you to precisely know how much is owed from month to month, and you may arrange your repayment accordingly. 

How to qualify for a low-interest loan

Lenders consider many factors when assessing your loan application. While basic qualifications like age, citizenship, and income are the same for all types of loans, there are some areas you need to pay more attention to qualify for a low-interest loan.

  • Good credit score: A good credit score is between 660 to 724. The repayment history, how much credit you have applied for, and the amount of available credit you’re using are other factors influencing your score. With a good credit score, you can get lower interest rates even with unsecured personal loans. 
  • Income and expenses: Lenders will review your income and expenses because they will calculate your debt-service ratio (DSR) to see if you can manage the monthly payments. A low DSR will increase your chance of approval and might qualify you for lower interest rates. 
  • Collateral: Providing collateral will secure the loan because lenders can repossess the asset in case of borrower default. This can lead to lower personal loan rates than usual because borrowers are seen as less risky. 

Can you apply for a low interest personal loan to consolidate debt?

A personal loan can be used for various purposes, including debt consolidation. Secured personal loans are popular for consolidating debt because they offer lower interest rates and longer term lengths. 

With a debt consolidation loan, you will receive a single loan with a lower interest that can be used to pay off higher-interest loans, leaving you with a generally lower monthly payment.

What documents will you need to provide to get a low interest loan

Lenders will typically require the following documents: 

  • Valid government-issued identification 
  • Bank statements, pay stubs, tax returns and other income documents 
  • Credit report 
  • Banking history 
  • Banking information  
  • Social Insurance Number (SIN)

Can you get a low interest personal loan with no credit check? 

For most lenders in Canada, credit checks are routine procedures that allow them to evaluate your risk as a borrower. But not all lenders need it as a primary requirement to provide loans. 

Alternative lenders, like Alpine Credits, can be more accommodating because they lend based on the equity you have in your home, regardless of your credit score. 

Conclusion

Navigating Canada’s various low interest loans doesn’t have to be complicated. Choosing the right type of lender and loan that suits your financial needs and goals can be easier with proper research. 

With over 50 years of experience in private lending, Alpine Credits has been helping Canadian homeowners get the funding they need through the equity they have in their homes. Connect with a Financial Solutions Specialist immediately to discuss your options today. 

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Frequently asked questions

There are no zero-interest rate loans in Canada. This is because financial institutions like banks, credit unions, and other alternative lenders lend based on the prime rate in Canada, which the Bank of Canada influences.

Personal loan interest rates vary all the time. But if you meet the qualifications listed above, such as a good credit score, you can gain access to a low interest personal loan. And if you’re unable to meet your bank’s requirements for a low interest loan, you can explore alternative lenders like Alpine Credits. 

The average personal loan interest rate in Canada as of August 2023 is 9.39%. While a good loan interest rate is relative for each borrower, assessing your financial situation and goals is key to getting the financial coverage you need. 

You can get low-interest loans in Ontario if you meet some of the qualifications above and are willing to provide the necessary documentation for the loan application.