How Much Can You Borrow as a Personal Loan in Canada?
How much can you borrow as a personal loan in Canada? The answer is rather complex, as it varies based on factors such as your current credit score and employment status to the purpose of the loan and existing loan security that guarantees payment.
That said, personal loans range wildly from $500 to $50,000 with repayment terms between six and 60 months and are issued by various financial institutions, from banks and credit unions to private lenders, pawn shops, and payday lenders.
Keep on reading below to get the details about the available loan amounts and the main factors affecting how much you can borrow.
How Much Can You Borrow From Banks
Canada’s major banks, such as Royal Bank of Canada, Toronto-Dominion Bank, and Bank of Nova Scotia, typically have an upper limit of $50,000 for personal secured loans.
However, federally regulated banks are also required to offer you products and services that meet your exact needs, and you can repay in a reasonable period. Therefore, they will seriously consider your creditworthiness, income, and other personal circumstances to assess your maximum borrowing power and keep you at or below that limit.
How Much Can You Borrow From Credit Unions
Credit unions are member-owned financial institutions focusing on serving their members’ needs at lower-interest rates. Similar to banks, credit unions provide personal loans between $1,000 and $50,000, albeit at somewhat better terms.
Moreover, they personalize these loans for their members with flexible repayment terms and may even offer unsecured loans for the same amounts as well.
How Much Can You Borrow From Private Lenders
Some of Canada’s largest private lenders also match the upper limit of $50,000 set by the country’s banks, but they do come with stricter terms and interest rates.
For instance, Fairstone—one of Canada’s largest non-bank lenders—presents both secured ($5,000–$50,000) and unsecured personal loans ($500–$25,000). This option suits applicants whose credit history prevents them from getting a bank loan.
That said, private lenders apply very high-interest rates that can go up to 40% for unsecured loans, which makes them the last option for borrowers.
Factors That Affect Personal Loan Borrowing Limits
This section will discuss the key factors influencing your loan borrowing limits in Canada. Understanding these factors can help you maximize your loan eligibility and secure the best terms for your financial needs.
1. Credit Score
As expected, your credit score is often crucial in a lender’s decision to loan you a certain amount of money. Basically, the better your score, the more you can borrow and at better interest rates and repayment periods since higher scores indicate lower risk.
2. Debt-to-Income Ratio
Your debt-to-income ratio describes the amount of your paycheck that goes to your monthly loan obligation. Applicants with lower DTIs typically qualify for larger loans since they are financially more stable and can set apart more money for loan rates.
3. Employment Status
Naturally, lenders will only approve you for large loans (or any loans at all) if you apply with a stable monthly income. You will need a better salary to increase the amount you can get, too, as you will have to submit higher monthly repayments.
4. Loan Purpose
Some lenders also approve higher loans if you submit a plan for the home project for which you need the loan. For instance, if you need money for home renovations, you can present a breakdown of the costs to get precisely the amount you need.
5. Loan Security & Down Payment
If you reduce the risk to the lender, you can increase the amount you can borrow. The two best ways to do that are by applying for a secured loan (you put up collateral) and using a sizeable down payment when purchasing expensive goods or real estate.
6. Loan Term
Since repaying large sums becomes easier with increased loan terms, lenders are more likely to approve them if the applicant agrees on a lengthier term, which also benefits them as they will be reaping interest rates for extended periods.
7. Existing Lender Relationship
When applying for a personal loan, borrowers should first review the options provided by their existing financial institutions since most banks, credit unions, and private lenders tend to prioritize and offer better deals to long-standing customers.
The Bottom Line
While the upper limit of personal loan amounts in Canada is $50,000 across most lenders, the amount you can borrow can vary wildly depending on factors such as your current credit score, existing debts, salary size, and loan security. Still, you can always improve your chances of getting a higher amount if you work on your creditworthiness.