Getting self-employed loans isn’t as hard as it used to be. A number of lenders offer personal loans for self-employed people in Canada. These range from several hundred dollars up to $50,000 or more.
You’ll need to meet eligibility requirements, which include proving that you have a steady income and can afford repayments. If you’re having trouble getting approved, apply with a cosigner who’s in a financially better position or provide collateral (such as home equity or vehicle ownership) to secure your loan.
Personal loans
Borrow anywhere from $500 up to $50,000, and repay in 3 – 60 months. Interest rates vary based on your credit score, income, existing debt load and other factors. Not all lenders offer bad credit loans, but those that do charge high rates.
Payday loans
These short-term loans range from $100 to $1,500. You usually have until your next payday to repay, but terms can reach up to 62 days. Pay $14 to $17 for every $100 borrowed, which amounts to an APR of over 300%. Learn more here.
Auto title loans
Own a fully paid off vehicle? Use it as collateral to borrow $1,000 or more (depending on your vehicle’s value), even if you have bad credit. You’ll have 3 – 60 months to repay, and interest can range from 9% to 49%.
Credit cards
Make purchases, withdraw cash (for a fee) and pay bills with a credit card. Get a simple card with no annual fee, or get a card with travel perks, rewards points or cash back. Rates can be higher than personal loans, unless you qualify for a low-interest card.
Home equity line of credit (HELOC)
Leverage home ownership to secure a line of credit worth up to 65% of your home’s value. Your mortgage and HELOC can’t exceed 80% of the property value. You only pay interest on funds you use, and rates generally range from 6.99% to 30%.
Cash advance apps
New to the Canadian market, cash advance apps let you borrow very small amounts of $20 to $350 with zero interest and no credit check. Some apps charge a monthly subscription fee or an extra fee for fast funding.
Lenders that offer loans for self-employed people in Canada usually require the following information:
According to the Canada Revenue Agency (CRA), a self-employed person “must operate a business and be engaged in a business relationship with the payer.” If you can determine where, when and how you work, you’re likely to be considered self-employed by the government. This includes freelancers, contractors and consultants.
According to Statistics Canada, 13.2% of people employed in Canada were self-employed in 2023, or over 2.65 million people. Most (71.9%) operate small businesses with no employees. Autonomy is cited as the biggest reason people choose to be self-employed (38.2%) followed by the ability to pursue passions (14.3%).
Yes, there are loans for self-employed people with bad credit. But you might have to look beyond your local bank to alternative lenders. These have less strict criteria to attract customers—including bad credit borrowers—who have a hard time getting funding from banks.
Some online lenders consider applicants with credit scores as low as 300. Perhaps the easiest way to find self-employed loans for bad credit is to use a loan broker like Loans Canada or LoanConnect. Once you fill out a single application, you’ll be matched with suitable lending partners from among the broker’s network. It’s typically free, and you’re under no obligation to move forward with a loan.
The cost of personal loans for the self-employed depends on factors like your loan term and interest rate (which can range between 6.99% and 46.96%). To illustrate, here’s how much a $5,000 loan could cost over a 3-year and 5-year term with 8%, 16% and 24% interest.
| Term | Interest rate | Monthly payment | Total cost |
|---|---|---|---|
| 3 years | 8% | $156.68 | $5,640.55 |
| 5 years | 8% | $101.38 | $6,082.92 |
| 3 years | 16% | $175.79 | $6,328.27 |
| 5 years | 16% | $121.59 | $7,295.42 |
| 3 years | 24% | $196.16 | $7,061.91 |
| 5 years | 24% | $143.84 | $8,630.39 |
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To find the best loan for you, consider the following factors when comparing self-employed loans in Canada:
Compare loans for the self-employed
Getting loans for self-employed people in Canada is a lot easier than it used to be, thanks to the rise of alternative lenders that work with a broader range of applicants that banks. But that doesn’t mean there aren’t any challenges. Here are some obstacles you could face when applying for a self-employed loan:
One of the toughest parts of getting a loan is proving that you can afford to repay it. If you can’t provide pay stubs like traditional employees, lenders will often ask you for a recent tax Notice of Assessment (NOA) or bank statements to see your base monthly and annual income. Some lenders may accept other forms of income like government benefits or investment earnings.
As a self-employed individual, your income stream may not be consistent. Clients come and go, and your professional landscape may change frequently. But lenders want to know that you can afford repayments today and in the future. As mentioned, documents that help prove this include Notices of Assessment from several recent tax years, bank statements from the past six months or longer and letters from long-term clients attesting to your ongoing work arrangements.
If you can hold off getting a loan right now, you can boost your credit score and more easily qualify for a loan by increasing your income, fixing any errors on your credit report and reducing your costs to free up income for debt repayment.
Having a cosigner on your loan can also help alleviate a lender’s hesitation. You and the second party would be equally responsible for loan repayment. Make sure you avoid getting stuck in a cycle of debt by borrowing more than you need.
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