Credit report and score
Canadian lenders typically pull a credit report from one or both of the national credit bureaus, Equifax Canada and TransUnion Canada, when assessing a personal loan application. The report shows payment history, existing debt balances, length of credit history and any records of default or collection, and the resulting score is generally used as a shorthand summary of that history.
A stronger credit history tends to support access to more favourable terms, while a thinner or weaker file can mean higher rates, stricter conditions, or a requirement for collateral or a co-signer, depending on the lender's own policies.
Income and existing debt load
Lenders generally assess whether a borrower's income is sufficient, relative to existing debt obligations, to comfortably support a new loan payment. This is often summarized through a debt-to-income or similar ratio, even though the specific thresholds and methods vary by lender.
Stable, verifiable income and a manageable level of existing debt generally support more favourable pricing, since they reduce the lender's assessed risk of missed payments.
Security and term length
Pledging collateral, such as a vehicle or savings, can reduce a lender's risk and sometimes results in more favourable terms compared with an otherwise identical unsecured loan, though it introduces the risk of losing that asset on default.
The term chosen also affects pricing in some cases, since the lender's exposure and expected risk profile can differ for a shorter versus a longer repayment schedule.
The type of lender
Rates and terms can differ meaningfully between major banks, credit unions, and non-bank or online lenders, reflecting differences in funding costs, risk appetite and the segment of borrowers each typically serves. It is worth requesting quotes from more than one type of lender rather than assuming any one category is automatically cheaper.
Credit unions in particular sometimes offer different terms to members compared with non-member rates, which is worth asking about directly.
The legal limit on interest
Canada's Criminal Code sets a ceiling on the interest rate that can legally be charged on a loan, above which the rate is considered a criminal rate of interest regardless of what any agreement says. This ceiling exists as a backstop and does not reflect typical market pricing for mainstream personal loans, most of which are priced well below it.
If a loan offer's disclosed rate looks unusually high, verifying the figure in writing and comparing it against other lenders is a reasonable precaution before proceeding.
Fixed versus variable rate structures
A fixed-rate loan keeps the same interest rate for the life of the term, making the payment predictable from the outset. A variable-rate loan is tied to a reference rate that can move over time, so the payment, or the portion of each payment going to interest versus principal, can change during the term.
Borrowers who prioritize predictability generally lean toward fixed rates, while those comfortable with some uncertainty in exchange for the possibility of a lower rate at times may consider variable structures, depending on what a given lender offers.