Personal loans in Canada are unsecured loans that individuals can use for various purposes, such as consolidating debt or funding major expenses. Loan amounts typically range from $500 to $50,000, with repayment terms from 6 months to 5 years. Interest rates vary based on credit score, ranging from 5% to 30%.
In Canada, personal loans are commonly used for various financial needs, such as consolidating debt, covering emergency expenses, or financing a large purchase. They can be obtained from banks, credit unions, or online lenders, and they offer a flexible way to manage personal finances when used responsibly.
Think of a personal loan as a financial tool — one that can bail you out of a tight spot or help you capture an opportunity you wouldn't have had otherwise. Whether it's for a sudden expense or a big-ticket purchase, having access to the right kind of loan can feel like finding a hidden ace up your sleeve.
Most personal loans are unsecured, meaning they don't require collateral like a house or car. This makes them a good option for those who may not have assets to use as security. However, because there is no collateral to back up the loan, the interest rates may be higher compared to secured loans.
Reasons why Canadians take out a personal loan:
1. Vehicle Purchase: This is the most common reason Canadians take out personal loans, with 41% of borrowers using them to buy a car.
2. Debt Consolidation: About 15% of Canadians take personal loans to consolidate their debts. This allows them to combine multiple debts into one, often at a lower interest rate.
3. Home Improvements: Another significant reason is home renovations, although the specific percentage isn't always provided in every survey, it remains a popular use of personal loans.
4. Credit Card Payoff: Around 13% of borrowers use personal loans to pay off credit card debt.
5. Other: The remaining percentage can represent various other uses such as financing emergencies, educational expenses, or other personal needs.
When they apply for a loan, 60% of Canadians will go to traditional banks while 40% of Canadians go to alternative lenders.
Based on their credit scores, 15% of Canadians qualify to borrow money at prime interest rates, 30% mid-tier borrowers and 45% of Canadians are subprime borrowers.
The borrower demographics for personal loans in Canada based on recent 2024 data is also very interesting due to the impact of inflation and higher cost of living.
Young Adults: The 18-35 Group - If you’re in this age range, chances are you’re paying off student loans and possibly have a car payment, as well as a balance on a few credit cards. Sound familiar? You’re not the only one. Many young Canadians are borrowing money to refinance their student debt or consolidate high-interest credit card balances.
With the average consumer debt sitting at around $17,000 (excluding mortgages), your overall debt load is actually lower compared to older generations. That’s not bad at all.
The Sandwich Generation: 35-54 Year Olds - Things can get challenging for these Canadians. You might be married, purchased a house, have a family and raising kids while also caring for aging parents, which adds financial pressure.
This age group is most likely to have a mortgage, car loan, an open line of credit and owe money on a few card credits.
It’s no surprise that this generation borrows more money than any other age group in Canada. With average total debt of between $525,000 and $541,000, loans are a familiar part of life, especially with the higher costs of living in 2024.
Golden Years: 55 and Up - Think getting a personal loan end after 55? Not quite. While this age group paid off the mortgage and their overall debt levels do start to decrease, many are still borrowing.
Whether it’s updating the home for retirement, dealing with unexpected medical expenses, or wrapping up some final debt, sometimes getting an unsecured loan is something that must be done.
For Canadians between the age of 55-64, average debt is around $302,000, and for those 65 and older, it’s about $127,000. So, even in retirement, borrowing remains a part of the picture.
Studies also indicate that men are more likely than women to consider taking out personal loans. In some surveys, about 32% of men expressed interest, compared to around 24% of women.
While women may be a bit less likely to take out a loan, their usage is on the rise. Many women are borrowing money to consolidate debt or to cover personal expenses.
