Can you get a loan as an immigrant in Canada?
Long story short: Yes! There are plenty of loans for immigrants in Canada, but if you want to do it right, it’ll take a little bit of time.
Anyone with a credit history with one of Canada’s two credit bureaus (Equifax and TransUnion) can qualify for a loan. To be clear, your credit score from your country of origin doesn’t follow you to Canada. You need to build a new one here.
This process takes at minimum three months of using a credit card and making payments. However, most banks like to see six months, if not a year, of payments.
Many of the best loans are also exclusively for permanent residents.
With that being said, there are some loans specifically designed for new immigrants, typically refugees, without an in-country credit score. These programs are typically provided by the government.
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Get A QuoteWho qualifies for an immigration loan in Canada?
Canada is viewed as a haven for refugees and offers the loans to match. The big one is the Immigration Loans Program (ILP).
These loans are intended to help refugees fleeing political persecution and economic or environmental collapse find a home in Canada. The ILP covers three areas:
- Transportation loans to help get to Canada
- Right of permanent residence fee (RPRF) loans
- Assistance loans
Assistance loans are especially important as they can apply to new Canadians seeking permanent residency, not just refugees. Eligible applicants can apply for help with basic needs like rent, utilities and food as well as employment tools or training.
But if you need assistance now there are other non-government options available in the short term.
Types of loans for immigrants in Canada
There are a few other types of loans available for immigrants in Canada beside those offered by the government.
Our top pick, and by far the best option, is Windmill Mircolending. Windmill aims to empower new immigrants to Canada through low-interest loans exclusively designed for skilled immigrants and refugees. Highlights include:
- Up to $15,000 in loans
- A 6.7% interest rate
- Mentorship and career coaching
Windmill is a registered charity and a mainstay of the skilled immigration sector. The charity also works with Immigration Refugees and Citizenship Canada.
There are also province specific options available, although many require permanent residency. One exception is British Columbia’s Community Futures Micro Loans for boundary regions.
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Start Trading TodayPeer to peer lending for new immigrants
For those who need cash now, peer to peer lending is another option. Peer to peer lending allows new immigrants to crowd source money for a loan through services like:
- goPeer for unsecured personal loans
- /r/Borrow on Reddit for small loans with short-term repayment periods
Keep in mind that although the requirements for peer to peer lending are lower, you still need to show a bit of credit history. For more on peer to peer lending, check out our breakdown of peer to peer lending in Canada.
Although payday loans are legal in Canada, they typically have sky-high interest rates, hidden fees and more.
How to get a loan as an immigrant: Credit building products
Beyond peer to peer lending, your only major option is to build credit to access bank loans through secured credit cards.
Most banks won’t give you a loan without a credit score of at least 660 (out of 900). What’s more, banks can be reluctant to give you a credit card without at least a bit of credit history.
This is where secured credit cards come into play.
These credit cards usually have their credit limit set based on a deposit you make when you activate the card. Many banks offer secured credit cards.
You can also look at purpose built credit building products. These are services that let you take out a loan for the express purpose of paying it down. Two options are:
Credit-building products like these are specifically designed to generate a reliable credit payment history.
Typically they let you take out a small amount of money, which you then pay installments towards. During this time, you don’t actually have access to the loan.
As long as you make your payments, your credit score will go up and without the temptation of actually spending any of the money itself.
Conclusion
There are plenty of options for new immigrants to build a life in Canada. However, the best bet by far is to slowly and steadily improve your credit score.
In the meantime, we strongly recommend using a combination of secured credit cards, KOHO’s credit building tool and perhaps even a Windmill Microloan to get a leg up.
FAQs
Can I qualify for a bank loan in Canada?
As we’ve discussed above, getting a bank loan in Canada as an immigrant relies heavily on a combination of your credit score and applying for the right kind of loan.
To check if you qualify for a bank loan it’s important to have the right information on hand. Before approaching a bank make sure to have on hand:
- Information on the nature of the loan (e.g. buying a new car)
- Personal details including legal name and birth date
- Employment and income information
- Co-signor details
- Assets
- Liabilities
Having all this information readily on hand can smooth out the process. The easier you make things for your lender of choice, the faster you can get an answer about a prospective loan.
What’s a good credit score for an immigrant?
Keep in mind that it takes time to build a good credit score. Banks and lenders want to see that you can reliably make payments so they’re guaranteed to get their money back, plus interest.
It takes three months of activity to create a baseline for a credit score. However, you likely won’t be taken seriously until at least six months, but ideally a year, have passed.
We strongly recommend trying to build your credit score naturally over your first year in Canada. Shoot for a score of 660 if possible.
How do I build credit?
Simply put, building credit comes from paying your bills on time with minimum interest generation.
At the end of the month you have something called a credit utilization rate. This represents how much of your available credit you’ve used. For example, a credit utilization rate of 20% on a card maximum of $2,500 means you have no more than $500 on your card at the end of the month.
Banks typically like to see a credit utilization rate of between 2% and 10%.
Keeping your credit utilization rate in this window is one of the best ways to start increasing your credit score.
How do credit scores in Canada work?
In Canada, credit scores start at 300 and go up to 900. A higher credit score means that you’re a reliable candidate for a loan.
- Excellent (800-900)
- Very Good (722-799)
- Good (650-719)
- Fair (600-649)
- Poor (300-599)
Ideally, you want to have a credit score of between 720 and 900. This is the range where you get lower interest rates from lenders.
People with lower credit scores are charged more interest because banks are worried you may default, which means they want more money on interest to compensate.
Sources
1. Government of Canada: Government of Canada reduces immigration (Oct. 24, 2024)
2. Government of Canada: Global Skills Strategy: Find out if you’re eligible for faster processing
3. Government of Canada: Regional Economic Mobility Pathways Pilot (Regional EMPP): Immigration Loans Program (ILP)
4. Windmill Mircolending: Home page
5. Government of Canada: Windmill Microlending
6. British Columbia: Community Futures Micro Loans — Boundary Region
7. goPeer: Home page
8. Reddit: r/Borrow
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