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Immigrating to a new country is a massive undertaking, and presents many challenges – both expected and unexpected. And a big part of settling in a new place is establishing your financial footing, for which you may need some help. Fortunately, accessing a Canadian loan as a newcomer is not as difficult as you might think. There are many different lenders who will work with new immigrants, and many of these have online application processes to make your life as easy as possible.
Not every lender is the same though, so to make sure your Canadian journey starts well, you need to find a reputable one to work with. That’s where Smarter Loans can help; we have compiled a list of trustworthy, vetted lenders that work with newcomers to the country and provide high quality products and services. You can see a list of these companies below; simply click on a name for more information, and when you have found a lender you like, click “Apply Now” next to their details to submit an application form. Or, if you’re having trouble choosing the right lender for you, pre-apply with Smarter Loans, and our experts will find the right solution for your needs.
And to further help you establish a successful financial footing in Canada, below we have broken down everything you need to know about credit in Canada, and how as a new immigrant you can get financial support.
You can pre-apply here at Smarter Loans and we will find a suitable lender for you.
Like many other countries, Canada relies on a “credit history” system for all adults. A person’s credit history details their financial past in terms of money borrowed and repaid, number of accounts, bill payment patterns, financial reliability, and so on. It also includes how long a person has been financially active in the country. Equifax and TransUnion are the agencies in Canada that are responsible for tracking and keeping this data.
A person’s credit history is distilled into a three digit number known as their “credit score”; this credit score is a vital part of their financial profile, and can affect ability to access all manner of financial products – including loans. Without a good credit score, you will find it difficult to obtain financial support from traditional financial institutions. And unfortunately, your financial profile from another country is not transferrable to Canada – you have to start building your Canadian credit profile from scratch.
As most traditional loans in Canada require a Canadian credit history, newcomers will struggle to access these products right away. However, that doesn’t mean there are no options at all.
Given the large number of people moving to Canada every year, a multitude of programs have been created to cater to this growing demographic.
The Immigration Loans Program (ILP) is offered by the federal government of Canada to help those who are moving or have recently moved to the country with some of the costs of their relocation. It’s specifically for disadvantaged people, such as refugees and protected persons. Like mainstream loans, the entire loan amount must be paid back to the government over time, plus interest.
There are several types of loan under the ILP; these are:
This loan covers costs related to getting to Canada – including transport, immigration fees, and International Organization for Migration (IOM) fees. Also included are some associated costs, such as accommodation while in transit, but there are exclusions too. You can’t use this loan to pay for baggage fees, shipping of personal effects, pre-departure medical services, or the transport of animals – including family pets.
A maximum loan amount of $15,000 per application is available, and you must apply for the loan in your home country, well in advance of expected travel.
Approval for a Transportation Loan is assessed on a case-by-case basis, and you should expect an interview to determine your suitability, as well as to assess your ability to repay the loan once you are settled in Canada. If it is deemed you may be unable to repay the loan, there are still ways to get help – for example, through the Resettlement Assistance Program.
Once you’re in Canada, you may be eligible for an Assistance Loan to help with the cost of settling into a new life; this loan can be used for rental deposits, utilities, food, clothing, household items, work-related tools, some other employment related expenses (such as certification fees), and other incidental expenses.
Assistance Loans are considered as a means of last resort, and if you have savings or other means to cover costs, you won’t be eligible. For more information, see here.
The Right of Permanent Residence Fee (RPRF) loan is extremely specific – it is only to cover the cost of paperwork once your PR is approved. The RPRF is $515 per application. For more on RPRF loans and further information on seeking permanent residence, see here.
Also offered by the federal government, the Interim Federal Health Program (IFHP) helps eligible people by providing limited, temporary health coverage, either in their home country, or once in Canada. Rules about who is covered are strict; you must be one of the following:
Only basic healthcare costs are covered and to gain approval, you can’t have use of any other healthcare insurance plan or program, public or private. This is another program that is intended to be a last resort; you can find more information about it here.
Windmill Microlending is a nationwide registered charity that offers affordable loans of up to $15,000 to skilled immigrants and refugees. The loans are intended to help newcomers pay for costs associated with career development and accessing appropriate employment, so that they can become financially successful. Many newcomers to Canada are underemployed given their past experience and training, and Windmill Microlending aims to help address this imbalance and improve long-term career success.
Specifically, Windmill Microlending loans can be used for:
Getting approval for a loan from Windmill Microlending is tough; you must be:
These rules mean that Windmill Microlending loans are not accessible by international students, live-in caregivers or refugee claimants.
All loans have a 6.45% interest rate, which is significantly lower than the rate you can expect as a newcomer to Canada from other financial institutions. The purpose of the rate is solely to cover Windmill Microlending’s costs, so they can continue to help immigrants and refugees in the future. They are not allowed to charge rates that would leave them with a profit, as they are a registered charity.
The sheer volume of new immigrants to Canada means that even the big banks are starting to cater to the needs of newcomers. Scotiabank was the first to do so with its StartRight and ScotiaRISE programs.
ScotiaRISE is an initiative that helps raise funds that go directly to Windmill Microlending – discussed above. The StartRight program is a separate, more hands-on stream that supports newcomers with vital financial services, such as:
In addition, those who are not yet on Canadian soil can open an International Account with Scotiabank that allows them to move up to $50,000 into the country ahead of time.
CIBC is another major bank that offers accessible financial products; their exact offerings change over time, but currently, those who have newly landed in the country can obtain:
RBC has a similar set of products and loans for immigrants, including:
Lastly, TD’s financial assistance services for newcomers come in a package known as the “New to Canada” package. This includes:
While accessing widely available loans generally requires an established history of credit or employment in the country, there are still some mainstream options for immigrants and refugees – usually from alternative lenders. These come in a few different forms, discussed below.
A personal loan is, unlike all of the other loans we have discussed above, extremely flexible in that you can use the funds for whatever purpose you like. Amounts from just a few thousand to $50,000 are available. Loan funds are released in a lump sum and must be paid back in regular payments, which include interest that can range from 6% to 30%+.
A line of credit offers you flexible use of any amount up to the preset credit limit. This means you can borrow variable amounts as and when you need, only paying interest on what you borrow, and making payments as you go. In this way the line is reusable, and funds can be used for any purpose.
Some lines of credit are secured, and these typically have lower interest rates and higher loan amounts than unsecured lines of credit. An example of a secured line is a home equity line of credit, that uses property as collateral.
A credit card is essentially a line of credit; it’s an extremely useful tool for everyday use, but can be very expensive in terms of interest. Most of the big banks offer credit cards with a limit of up to $15,000 to new immigrants and refugees, and many of these do not require security deposits.
A credit card is one of the most accessible forms of credit as a newcomer, and a great way to start building your Canadian credit history – as long as you make your payments on time.
The vast majority of people need a mortgage in order to purchase a home. This is a secured loan – with the property in question acting as collateral – and is usually very long term, sometimes lasting 25 or 30 years. Interest rates are usually lower than with smaller, shorter term loans.
A car loan is another type of secured loan, with the security in question being the vehicle purchased. Car loans vary greatly in terms of amount, duration, and interest rates. Many car dealerships offer their own lending programs, but you can also get a car loan from a bank, online financial provider, or private lender. Loans are available for new and used cars.
All lenders in Canada have their own eligibility requirements, with some holding strict criteria, and others with looser rules or catering to a specific demographic (e.g. those with bad credit). However, regardless of what type of loan you apply for, you can expect to have your details examined in these key areas:
Immigrants arrive in Canada with an average of $47,000 in savings, of which $20,000 is left after the expense of getting settled. 19% of new immigrants have no savings at all when they arrive.
Savings can be a big help in getting you settled, but they should not be your only focus. It’s important to start building your Canadian credit history as soon as possible, so that you can obtain more financial products and cheaper rates over time.
There are a few simple ways to build your credit history:
This is an easy place to start as more likely than not, you’ll need a Canadian bank account for your new life anyway. Having a bank account does not itself affect your credit score, but once you open a bank account in Canada, you will be registered as a Canadian consumer and credit bureaus will open a fresh credit file for you.
There are many low risk and accessible credit products that will help you build a positive credit profile. A secured or low-credit credit card is one; affordable loans for immigrants and loans for skilled immigrants are also good options.
There are also dedicated credit-builder loans. As long as you make the repayments (or pay off the balance) on these products consistently, they will over time help your credit. Just make sure you don’t have too many accounts open at once.
By signing up to a new cell phone plan in Canada and paying all of your bills on time, you’ll help your credit. This is because cell phone providers report your financial activity to the credit bureaus.
As with loans and cell phones mentioned above, paying your other bills on time matters. Utilities, rent, bank charges, and so on – making a late payment or missing a payment can have a serious negative effect on your credit score, so staying on top of this is crucial to building long-term credit worthiness.
66% of immigrants send money home to friends and family – 17% do so monthly, and 24% do so a few times a year; the average amount sent is $2,300.
While this is an important activity for many, don’t ignore the significance of having Canadian assets and savings. Asset level – and income – affects your ability to access financial products, both now and in the future.
Yes; as an immigrant you may be eligible for financial assistance, including loans designed specifically to cater to the needs of newcomers. Some of these programs are offered by the government; these focus on affordable loans for low income immigrants. Other products are available from other financial institutions, like the big banks, or charities like Windmill Microlending.
Depending on what you need the loan for, you can get one from the government, a charity, or a mainstream or online financial institution.
Yes; most of the big banks have special ‘newcomer’ programs for new immigrants, and many of these include a credit card. Some even have limited time offers that include cash-back or no-fee cards. You usually need one or more chequing accounts with the bank in question to qualify, and it’s vital you understand how you will be charged interest on every purchase made with the card. You must also remember to make your regular payments on the card, to protect your Canadian credit profile.
Yes; financial assistance is available from Windmill Microlending, a charity that specializes in helping skilled immigrants achieve career success in their new country. These loans charge interest and to qualify you must meet certain eligibility criteria; the intent is to fund career development and job-related needs, such as qualification assessment, education, licensing, and so on.
Yes; for many, buying a new home is an important step in settling into a new place. But approval for a standard mortgage requires a Canadian credit profile and a good credit score – and almost no one has the finances to cover the entire purchase price of a new home on their own.
Thankfully, mortgage options exist that can help fund your dream of home ownership, regardless of how long you’ve been in Canada. Take a look at the newcomer mortgage options provided by the likes of TD, Scotiabank, RBC and CIBC for more information.
No, not specifically; the government’s loan program is called the Immigration Loans Program (ILP) and focuses on affordable loans for refugees and immigrants who need cash to cover certain basics, like transport, healthcare and settling in.
However, Windmill Microlending is a charity that operates throughout Canada to help further career success by providing loans to cover schooling, qualification, coaching, and so on, to help advance the careers of newcomers to ensure they succeed.
Yes; while some loans require PR, many only require proof of residency in order to be eligible for approval. Newcomers therefore have plenty of options; and as long as you don’t miss a payment, a loan will help you build your credit profile.
These companies are recognized for their excellent service, product offering and financial literacy education for all Canadians.
