Hardbacon logo

The Ultimate Guide to Alternative Lending in Canada

By Arthur Dubois | Published on 26 Sep 2023

Alternative lending: non-government backed loan, providing flexible financing options beyond traditional channels.

    In recent years, alternative lending has become increasingly popular in Canada as a means for individuals to access much-needed funds. Traditional lending institutions have long been the go-to source for personal loans, but alternative lending offers a fresh and innovative approach to borrowing. If you’re an individual looking for quick access to cash, alternative lending may just be the solution you’ve been searching for. In this comprehensive guide, we will explore the world of alternative lending, its various types, the lending process, and the many benefits it offers. Buckle up and get ready to discover a whole new world of borrowing options!

    Understanding Alternative Lending

    Before diving into the intricacies of alternative lending, it’s essential to have a solid grasp of what the term actually means. Alternative lending refers to the practice of borrowing money from sources other than traditional banks or credit unions. It involves a range of non-traditional lenders who provide loans through digital platforms, peer-to-peer networks, and microfinance institutions. This form of lending has gained traction due to its flexibility, accessibility, and speed.

    In Canada, a staggering fact looms large: over 8 million Canadians have credit scores below 720, classifying them as non-prime and sub-prime borrowers. This means they would struggle to qualify for a loan from a traditional financial institution, like a bank or credit union. For these individuals, the financial landscape can seem daunting, and access to much-needed loans becomes a real challenge.

    Without access to installment loans offered by alternative lenders, everyday Canadians with non-prime credit scores have few options when it comes to accessing loans for essential expenses. Often, they find themselves resorting to payday loans, which come with exorbitant interest rates, trapping them in a cycle of debt that can be difficult to escape.

    Alternative lenders provide an opportunity for everyday Canadians to repair their credit score and eventually qualify for bank loans at lower interest rates. They do this by reporting loan payments to the credit bureau, helping borrowers build a positive credit history. This means that as individuals consistently make on-time payments with alternative lenders, their creditworthiness improves, increasing their chances of securing more favorable terms from traditional financial institutions in the future.

    The Rise of Alternative Lending in Canada

    In recent years, alternative lending has experienced unprecedented growth in Canada. The alternative lender portfolio increased from an estimated $9 billion in 2015 to $15 billion in 2020. A combination of factors, including tightening regulations, evolving customer preferences, and hard economic conditions have contributed to this rise. Traditional lenders often have stringent requirements and time-consuming processes, making it difficult for many individuals and businesses to secure credit. As a result, alternative lending has emerged as a viable and attractive option for borrowers seeking greater accessibility and ease of approval.

    Canada’s alternative lending market has seen the emergence of numerous digital platforms and fintech companies that are disrupting the traditional lending landscape. These platforms leverage advanced algorithms and data analytics to assess creditworthiness, allowing them to make faster and more accurate lending decisions. This streamlined process has significantly reduced the time it takes for borrowers to access funds, providing a much-needed solution for those in urgent need of financing.

    Moreover, alternative lending has also played a crucial role in fostering financial inclusion in Canada. Many individuals that were previously underserved by traditional banks now have access to credit through alternative lenders. This has opened up opportunities for individuals to obtain the funding they need to get ahead in life.

    As the alternative lending industry continues to evolve, it is expected to play an even more significant role in the Canadian financial landscape. With its ability to provide flexible financing options, quick approvals, and personalized service, alternative lending is poised to become a mainstream choice for borrowers across the country.

    Types of Alternative Lenders

    Alternative lenders, also known as B lenders, come in various shapes and sizes, each catering to the unique borrowing needs of individuals. Let’s explore some of the most common types of alternative lenders in Canada:

    Peer-to-Peer Lenders

    Peer-to-peer (P2P) lending platforms have revolutionized the lending landscape by directly connecting borrowers to individual investors. These online platforms act as intermediaries, facilitating the borrowing process and ensuring fair terms for both parties.

    One of the key advantages of P2P lending is the competitive interest rates it offers. By eliminating the traditional banking system, borrowers can often secure loans at lower rates compared to traditional lenders. This makes P2P lending an attractive choice for individuals looking to save on interest costs.

    In addition to competitive interest rates, P2P lenders also provide simplified applications and faster approvals. The online nature of these platforms allows borrowers to complete the application process from the comfort of their own homes. With streamlined procedures and efficient communication channels, borrowers can receive loan approvals in a matter of days or even hours.

    Online Lenders

    Online lenders have gained significant popularity in recent years, providing borrowers with fast access to funds. These lenders typically operate digitally, allowing borrowers to apply for loans through a user-friendly website or mobile app.

    One of the key advantages of online lenders is the convenience they offer. Borrowers no longer need to visit physical branches or spend hours on paperwork. With just a few clicks, they can complete the entire loan application process online, saving time and effort.

    Moreover, online lenders often leverage advanced algorithms and automated processes to assess creditworthiness. By analyzing various data points, such as income, employment history, and credit scores, these lenders can make quick and accurate lending decisions. This not only speeds up the approval process but also increases the chances of approval for borrowers with limited credit history or unconventional income sources.

    The 5 Best Alternative Lenders in Canada

    Now that you understand what alternative lenders are, it’s time to move on to the actual lenders themselves. In this next part, we’ll highlight the five best alternative lenders in Canada, each renowned for their innovative financial solutions and commitment to meeting a variety of borrowing needs.


    GoPeer, operating in all Canadian provinces, is transforming the lending landscape by offering a unique peer-to-peer platform that stands out as a beacon of financial accessibility. Canadians can access loans of up to $35,000 with rates as low as 8% APR, making it an affordable choice. Applying for a GoPeer loan is incredibly easy and fast, thanks to a streamlined online application process that provides a response within 24 hours. What sets GoPeer apart is its peer-to-peer model, where loans are funded by thousands of anonymous Canadians, fostering a sense of community and trust. With its widespread availability in all provinces, competitive rates, and commitment to financial inclusivity, GoPeer is reshaping the way Canadians access credit.


    Fairstone is an exceptional choice for Canadians seeking personal loans from alternative lenders. Their diverse range of specialized loans, including wedding, travel, credit-building, and emergency loans, distinguishes them as experts in accommodating non-traditional financial needs. With borrowing options ranging from $500 to $50,000 (up to $25,000 for online loans), Fairstone provides flexible solutions that align with individual budgets. Applying for a loan is effortless, as they offer quick online quotes, with some borrowers receiving funds on the same day. Moreover, Fairstone’s extensive network of over 250 branches across Canada ensures accessibility and personalized support, solidifying their reputation as a responsible and customer-focused lending choice for Canadians in all provinces.

    Spring Financial

    Spring Financial, as an alternative lender, stands out in Canada by offering specialized loans ranging from $500 to $35,000, all conveniently accessible through a hassle-free online application process, eliminating the need for branch visits. What sets them apart is their commitment to flexibility, as all their loans are open with no extra fees or penalties for early repayment. They further support borrowers by reporting every repayment to credit bureaus at no extra cost, aiding in credit building. With interest rates spanning from 9.99% to 46.99% and terms ranging from 6 to 60 months, the loan options cater to a variety of needs, and the specific rate depends on factors like credit score and loan amount. Serving all Canadian provinces, Spring Financial offers a vital alternative to traditional banks for tailored lending solutions.


    Parachute stands out as an exceptional choice for Canadians seeking debt consolidation, offering simplicity and rewards. With Parachute, you can combine all your debts into one manageable loan ranging between $5,000 to $25,000, featuring a single payment date, a monthly installment, and a fixed interest rate ranging from 24.99% to 29.99%, with flexible 30 to 60-month repayment terms. What truly sets Parachute apart is its unique cashback incentive for adhering to healthy financial behavior, rewarding borrowers who make timely payments, maintain low credit utilization, pay bills on time, and avoid accumulating new debt. This innovative approach allows borrowers to potentially leave with more savings than when they started. Parachute‘s availability across all Canadian provinces, except Quebec and Saskatchewan, makes it a compelling choice for those seeking a streamlined and rewarding path to financial stability.


    Nyble is the perfect financial solution for Canadians looking for a small line of credit to handle unexpected expenses. For just $7.99 per month, Nyble offers a customized line of credit, ranging up to $150 based on factors like your credit score and income. Connecting your bank account makes accessing funds easy, and Nyble simplifies repayments by automatically deducting them from your account on your next payday. What sets Nyble apart is its credit-building feature – it reports your repayments to credit bureaus, helping you improve your credit history. Additionally, Nyble provides robust security, including up to $100,000 in coverage against hacking and identity theft. Plus, it’s available in all Canadian provinces. Nyble combines affordability, credit enhancement, and security, making it an excellent choice for Canadians seeking a reliable financial safety net.

    The Process of Alternative Lending

    While alternative lending offers a refreshing departure from traditional loan processes, it’s important to understand the steps involved in accessing funds through alternative lenders. Let’s explore the typical process:

    Application and Approval

    The first step in securing an alternative loan is to fill out an application, usually done online or through a mobile app. This streamlined process saves time and allows borrowers to apply from the comfort of their own homes. The application will require you to provide personal and financial information, which the lender will use to assess your creditworthiness and determine whether to approve your loan.

    Alternative lenders often use innovative algorithms and data analytics to evaluate loan applications. They consider various factors beyond just credit scores, such as income stability, employment history, and cash flow. This approach provides a more holistic view of an individual’s financial situation, giving borrowers with less-than-perfect credit a chance to secure funding.

    Interest Rates and Fees

    Once approved, you’ll be presented with the terms of the loan, including interest rates and any associated fees. Alternative lenders may offer more flexibility in setting interest rates, taking into account your credit history and other factors. This personalized approach allows borrowers to negotiate rates that align with their financial goals and capabilities.

    Alternative lenders often provide transparent fee structures, making it easier for borrowers to understand the total cost of borrowing. This transparency empowers individuals to follow a simple strategy to deal with their debt and avoid any unwanted surprises.

    Repayment Terms

    Alternative lenders often provide more flexible repayment terms than traditional banks, tailoring them to fit your unique circumstances. You may have the flexibility to choose shorter or longer repayment periods, depending on your financial situation. This customization allows borrowers to find a repayment plan that suits their cash flow and minimizes financial strain.

    Furthermore, alternative lenders may offer options such as interest-only payments or flexible payment schedules. These features provide additional flexibility for borrowers, allowing them to manage their loan repayments in a way that aligns with their income and financial goals.

    It’s important to consider your income and cash flow when selecting the repayment terms, ensuring that they are manageable and achievable. Alternative lenders understand that financial circumstances can change, and they strive to provide options that accommodate borrowers’ evolving needs.

    Alternative Lending in Canada: The Bottom Line

    In conclusion, the process of alternative lending involves a streamlined application and approval process, personalized interest rates and fees, and flexible repayment terms. These features make alternative lending an attractive option for individuals seeking funding, especially those who may not meet the strict requirements of traditional banks. When shopping for a personal loan, always make sure to compare your personal loan options to find one that best suits your financial needs.

    Compare Canadian Loans
    Compare Canadian Loans
    Find a loan that really meets your needs, whether urgent or not!
    Arthur Dubois is a personal finance writer at Hardbacon. Since relocating to Canada, he has successfully built his credit score from scratch and begun investing in the stock market. In addition to his work at Hardbacon, Arthur has contributed to Metro newspaper and several other publications