How to get a $40,000 loan in Canada

If you need a $40,000 loan in Canada, there are plenty of lenders who can help. Shopping around for the lowest rate and best terms can make paying off your loan a whole lot more affordable. Just be aware that you’ll need to be in a strong financial position to qualify for $40,000 loans.

Keep reading for all the essential info on how to find the right loan for you.

Compare loan providers offering $40,000 loans in Canada

How do I get approved for a $40,000 loan?

The exact eligibility requirements you’ll need to meet vary between lenders. However, as a general rule, personal loan lenders look for borrowers with the following:

• Good credit. You’ll typically need a credit score of 660 or higher to qualify for a loan of this size.
• Good income. $40,000 is a substantial amount of money, so you’ll need sufficient income to make your monthly payments and still have room in your budget for regular expenses.
• A steady job. You’ll have a better chance of approval if you demonstrate stable, full-time employment for at least three years.
• A low debt-to-income (DTI) ratio. Your DTI compares the amount of your outstanding debts to your regular income. Lenders use it to assess your ability to repay the loan – the lower your ratio, the better. Lenders typically look for a DTI under 40%.
• A positive net worth. A net worth well over $40,000 will help you get approved. Your net worth is your assets minus your liabilities.

Owning a home helps

Owning your own home can also increase your chances of approval. If you’ve got a long history of making on-time mortgage repayments, this shows the lender that you know how to budget for regular loan payments. On top of that, if you offer your home as collateral, you’ll be able to access lower rates – but you risk having your home repossessed if you default on the loan.

It also helps if you’ve been living in your home for more than three years.

Basic requirements

Finally, you’ll also need to satisfy a range of general requirements, including the following:

• Be 18 or older (or the age of majority where you live).
• Be a Canadian citizen or permanent resident.
• Have an active bank account.
• Provide proof of ID and proof of income.

Where can I get a $40,000 personal loan?

There are a few types of lenders that offer $40,000 loans in Canada:

• Banks. The Big Five banks and other banks offer $40,000 personal loans in Canada, but you’ll need strong credit to apply. Bank personal loans come with strict eligibility criteria, but if you satisfy these requirements, you can access competitive interest rates. You may even get a discounted interest rate if you’re already a long-time customer, so it’s worth shopping around to see what’s available.
• Credit unions. Personal loans from credit unions tend to have lower loan limits than banks, so not all will offer $40,000 loans. Those that do can provide competitive rates, but you’ll need to become a member before you can take out a loan. Eligibility requirements tend to be less strict than the criteria imposed by banks, but you’ll still need a good to excellent credit score and have to satisfy minimum income requirements.
• Online lenders. Online private lenders of personal loans have more lenient eligibility criteria and offer fast loan approvals within 24–48 hours, but their interest rates are usually higher than banks and credit unions. It’s also worth noting that not many online lenders offer loans of this size.

7 steps to get the best $40,000 loan

1. Get your credit score.

Find out what your credit score is so you know which lenders you should consider approaching for a loan.

2. Decide what type of personal loan you want.

There are a couple of factors to consider here:

• Secured vs unsecured loans. A secured personal loan requires you to provide an asset, such as your house, as collateral. You get lower interest rates in return, but you run the risk of the asset being repossessed if you can’t afford your repayments. Unsecured personal loans don’t require collateral but have higher rates. If you’re looking to get a $40,000 loan, lenders may require you to put up collateral.
• Fixed vs variable loans. Most personal loans have fixed rates, which means your rate stays the same throughout its loan term. With a variable-rate personal loan, your rate goes up or down depending on what the Bank of Canada does. If your rate goes up, more of your monthly payments will go towards paying the interest. If your rate goes down, less of your monthly payments will go towards paying the interest and more towards the principal.

3. Compare lenders.

Next, start researching lenders and the $40,000 loans they offer. Consider the following:

• APR. The annual percentage rate takes into account the interest rate as well as any fees that apply to get the loan. Use it to work out the true cost of a loan.
• Fees. Read the terms and conditions for details of any origination, NSF and late payment fees that may apply.
• Eligibility criteria. Find out what eligibility requirements the lender has in terms of credit score, income, DTI and employment history.
• Loan amounts. Some lenders have maximum loan amounts that may be lower than what you need, so make sure you find a provider that offers $40,000 loans.
• Repayment terms. While some lenders offer maximum loan terms of 5 years, others offer 7-year and 10-year loans. Check the repayment schedule to find out whether weekly, bi-weekly or monthly payments are required, plus whether you can make additional payments any time you want. Finally, if you pay your $40,000 loan ahead of schedule, will you be charged a prepayment penalty?
• Reputation. Research the lender to make sure they’re legitimate, properly registered and follow all lending laws in your province or territory. Check independent review sites to see what other customers have to say about the lender, and keep an eye out for any warning signs that could indicate a personal loan scam.
• Collateral they accept. Finally, if you want to apply for a secured $40,000 loan, check which assets the lender accepts as collateral, such as your home or investments.

4. Get pre-approved with your top choices.

Once you’ve narrowed the options down to a shortlist, apply for personal loan pre-approval. This usually involves the lender performing a soft credit check and, if your financial situation seems acceptable, providing you with pre-approval and an estimate of how much the loan will cost. You can then use this to compare $40,000 loans between lenders.

5. Pick the best offer and proceed with the lender.

Weigh up your options and decide on the right loan for your needs. You’ll then need to submit a full application and complete a credit check.

6. Get approved.

Approval can take a few days to a few weeks depending on whether collateral is involved or not. Once you’re approved, the lender will send you a loan contract. Read over all the details carefully before you sign.

7. Get funded.

The time it takes for the money to arrive in your bank account varies between lenders, but it can be as soon as one to two business days in some cases.

What is the monthly payment on a $40,000 loan?

The size of your monthly loan payments will vary depending on the interest rate and the loan term. You have lower monthly repayments with a longer loan term, but you also end up paying more interest in the long run.

Example: $40,000 loan over 5 vs 10 years at 8.45% and 10.15%

Loan amount	APR	Loan term	Monthly payment amount	Total cost of the loan	Extra cost compared to the cheapest loan
$40,000	8.45%	5 years	$820	$49,182	–
$40,000	8.45%	10 years	$495	$59,385	$10,203
$40,000	10.15%	5 years	$853	$51,170	$1,988
$40,000	10.15%	10 years	$532	$63,832	$14,650

As you can see, a higher interest rate and a longer loan term can have a big impact on the total cost of a $40,000 loan. This table also shows how important it is to find a loan with a repayment plan to fit your budget. While you need a monthly payment you can afford to cover along with all your regular expenses, choosing a longer loan term means a higher overall cost and that it’ll take you longer to get out of debt.

Can you get a $40,000 loan with bad credit?

No. It’s not really possible to qualify for a loan of this size if you’ve got bad credit, but there are a couple of other options you can consider.

Take steps to improve your score before applying for a loan. Disputing any errors in your credit report, paying down your credit card debt and consolidating your debt could all help.

If you wish to maximize the amount you can get approved for, consider a car title loan, which uses your paid-off car as collateral. You can continue to use your car as you make loan payments, but if you default, you could lose your car.

Can you get a $40,000 loan with no credit check?

No. You can’t get a $40,000 loan in Canada without completing a credit check. The lender will need to assess your credit history and ability to repay a loan before granting you approval.

While no credit check personal loans do exist, they’re only available for significantly smaller loan amounts. With this in mind, to avoid being scammed, steer clear of any lender that claims to offer no credit check $40,000 personal loans.

How do I get a fast $40,000 personal loan?

Getting a $40,000 loan will take longer, from a few days to a few weeks, than loans with smaller amounts. This is because it’s considered a big loan, so lenders will make sure to thoroughly review your finances.

If you need a $40,000 loan as soon as possible, car title loans are one of the fastest big loans you can get.

What can you use a $40,000 personal loan for?

There usually aren’t any restrictions on how you can use your $40,000 loan. Some of the possible uses for the money include the following:

• Debt consolidation
• Home improvements
• Investing in property
• Paying for a vacation
• Covering the cost of a wedding
• Paying emergency medical bills

Can I get the $40,000 CEBA loan?

No. The Canada Emergency Business Account (CEBA) program was designed to offer financial support to Canadian businesses to help them navigate the pandemic. It offered interest-free, partially forgivable loans of $40,000 and $60,000 to small businesses and non-profit organizations around the country.

However, applications for loans under the CEBA program closed on June 30, 2021.

Frequently asked questions

• What documents will I need to provide to get approved for a $40,000 loan?

  You will generally need to provide the following personal loan documents:

  • Proof of ID, such as your driver's licence or passport.
  • Your Social Insurance Number.
  • Proof of employment and income, such as pay stubs and bank statements.
  • A mortgage statement or lease agreement.

• How much interest will I pay on a $40,000 loan?

  The amount of interest you'll pay will depend on your personal financial situation. The lender will assess your credit score, income and ability to repay the loan before determining your rate. However, as a general guide, personal loan APRs start at 6.99%. Compare personal loan rates in Canada.

• Where can you get low interest rates for a $40,000 loan?

  Banks and credit unions tend to offer lower interest rates than online lenders, but you'll need excellent credit to access the best rates. You can also access a better interest rate by taking out a secured loan, but the collateral you provide could be repossessed by the lender if you default on the loan. Check out our guide to low-interest personal loans for more information.

• Can you get guaranteed approval on a $40,000 loan?

  No. Avoid lenders advertising guaranteed approval, especially for a loan of this size, because it could be a scam.