Personal Loan Rates in Canada (2026): How They Work and the 35% Limit

There is no single “personal loan rate” in Canada. The rate you’re offered depends mainly on your credit history, whether the loan is secured, the type of lender and the length of the loan. Rates are anchored to the Bank of Canada’s policy rate and the banks’ prime rate, and by law no lender can charge more than 35% a year, including all fees.

Below is where the benchmark rates stand, what moves your personal rate up or down, and how much the rate changes the real cost of borrowing.

Where benchmark rates stand (October 2026)

• Bank of Canada policy rate: 2.25%. The Bank held its rate at 2.25% at its September 2, 2026 decision.
• Prime rate at the major banks: 4.45%. Variable-rate loans and lines of credit are usually priced as prime plus a margin, so they move when prime moves.

These figures can change at any Bank of Canada decision. Check the Bank of Canada’s policy rate page for the latest.

What decides the rate you’re offered

According to the Financial Consumer Agency of Canada (FCAC), the main factors are:

• Your credit history. Your credit report, credit score and existing debts affect both the rate and the type of loan you can get.
• Secured or unsecured. A secured loan is backed by something you own, such as a car or savings. It usually comes with a lower rate because the lender takes on less risk, but you can lose the asset if you don’t repay. An unsecured loan has no collateral and usually costs more.
• The type of lender. Banks, credit unions, online lenders and high-cost lenders price risk very differently.
• Fixed or variable. A fixed rate stays the same. A variable rate moves with prime.
• The term. A longer term lowers the monthly payment but adds to the total interest you pay.

The legal limit: 35% a year

Since January 1, 2025, Canada’s criminal interest rate has been 35% APR. The FCAC explains that this limit includes all fees, costs and interest you pay to get the loan, not just the stated interest rate. Some kinds of credit, such as payday loans and pawn loans, are covered by separate rules.

Because the limit counts fees, always compare offers by the annual percentage rate (APR) and the total cost of borrowing, not only the advertised interest rate.

How much the rate really matters

The table below shows the cost of borrowing $10,000 at a few example rates. These are illustrations calculated with a standard loan formula, not rates offered by any lender.

Two things stand out. At higher rates, the total interest climbs fast. And at every rate, choosing five years instead of three cuts the payment but raises the total cost.

Ways people get a lower rate

• Check your credit report first. You can request your report free from Equifax and TransUnion and dispute any errors before you apply.
• Start with institutions you already bank with. An existing relationship can help, and credit unions are worth comparing too.
• Consider a shorter term if the payment is manageable.
• Borrow only what you need. The FCAC cautions that a lender may offer you more than you need, and warns against borrowing more than you can afford.
• Compare at least two or three written offers on APR and total cost.

Your rights when you borrow

• Clear disclosure. Federally regulated lenders must tell you the loan amount, the interest rate and whether it’s fixed or variable, the term, the payment amount and other fees.
• Paying it off early. The FCAC notes that many lenders let you pay off a loan early without a penalty, though some charge a fee. Some provinces go further: in Alberta, borrowers with non-mortgage credit agreements can pay off the full balance at any time, or prepay part of it on a scheduled payment date, without penalty.
• Consequences of missed payments. If you don’t repay, the lender can take collection action, including suing you, and a secured lender can take the asset.

Alternatives to a personal loan

• A line of credit: usually variable and tied to prime. You pay interest only on what you use, but the rate can rise.
• A secured loan: usually a lower rate, but your collateral is at risk.
• Non-profit credit counselling: if you’re borrowing to manage existing debt, a non-profit credit counsellor can help you review options before you take on new credit.

Red flags

• Any lender asking for a fee up front before approving you. Advance-fee loan offers are a common scam; report them to the Canadian Anti-Fraud Centre.
• “Guaranteed approval” no matter your credit.
• A total cost that works out to more than 35% a year once fees are included.
• Pressure to sign immediately, or refusal to give you the terms in writing.

Frequently asked questions

What is a good personal loan rate in Canada?

It depends on your credit, the loan type and the lender. Borrowers with strong credit and secured loans usually get the lowest rates. The useful test is to compare several written offers on APR and total cost.

Are personal loan rates tied to the Bank of Canada rate?

Variable-rate loans and lines of credit usually move with the prime rate, which follows the Bank of Canada’s policy rate. Fixed rates are set when you sign and don’t change.

What is the maximum interest a lender can charge?

35% a year, including all fees, costs and interest, under the criminal interest rate limit in force since January 1, 2025. Payday and pawn loans have separate rules.

Does a longer loan cost more?

Usually, yes. A longer term lowers the monthly payment but adds to the total interest paid.

Can I pay off a personal loan early?

Often, yes. Many lenders allow it without a penalty, and some provinces, such as Alberta, guarantee the right to prepay non-mortgage credit without penalty. Check your agreement.

Sources

• Financial Consumer Agency of Canada: Personal loans
• Bank of Canada: Policy interest rate
• Alberta King’s Printer: Cost of Credit Disclosure Regulation