Can international students get a bank loan in Canada?

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Can international students get a bank loan in Canada?

Rounding it up

  • International students are usually ineligible for federal loans from the Canadian government.

  • International students can still secure funding for their education from a commercial bank or scholarship program.

  • Different banks offer varying terms for international students – read the fine print before you take out a loan.

  • There are free and competitive scholarship and grant programs that are uniquely offered to international students in Canada.

6 min read

Ryan Severance
#student#university#international student#loan

International students from all around the world travel to Canada each year to pursue a higher education. Many of these students are burdened by financial responsibilities that may require a bank loan if they want to make ends meet. Securing a loan can be a confusing process in the best of circumstances, and many international students may be totally unfamiliar with the Canadian financial landscape. Some may wonder whether international students can secure bank loans and other forms of financing at all.

Are you eligible for bank loans as an international student in Canada? Here’s everything you need to know about obtaining a line of credit as you seek your degree in the Great North.

Scholarships and student loans

For those international students seeking to pay for the cost of higher education, scholarships and student loans are usually the best bet. Scholarships and grants are available to many Canadian students, but these are often aimed at native students who have a vastly better chance of securing them. Many international students will find that scholarships and educational grants are either unavailable to them or incredibly difficult to secure. Still, there are helpful resources you can consult to identify post-secondary scholarships or programs that international students may be eligible for. Your educational institution may also have an international education office on campus which you can consult when searching for scholarships. Many scholarships, unlike loans, don’t require students to pay back what they are granted, making the extra effort often worth it.

Seeking private funding on your own may be the quickest and most viable route for financing your higher education, however. Student loans from private lenders can often be spent on both educational and everyday living expenses.

Ontario and British Columbia have the highest number of international students in Canada, so private lenders in those regions may be more familiar with the needs of students when it comes to dispensing loans. While the IRCC (Immigration, Refugees, and Citizenship Canada) will expect international students to pay for their own higher education, there are no formal prohibitions on securing a student loan in order to do so. Students should always familiarize themselves with the basics of Canadian interest rates before seeking a loan.

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Consider an unsecured loan

While government loans are usually paid back after you graduate, a private lender may have certain interest rates you have to deal with once you’ve received a loan. Students who have an established credit history may find unsecured loans to be their best bet, as you won’t require collateral to get your funding. A stellar credit history, a well-paying job with a high income, or a low debt to income ratio may be the only thing a student needs to obtain an unsecured loan to pay for books, housing, or other expenses. These loans can help you achieve the financial goals you should be establishing early in your career.

A Canadian bank may only be willing to offer an education loan to an international student if they have a Canadian citizen co-sign the loan. International students with relatives or close friends in Canada may find this option to be the most appealing. Those who don’t have someone to serve as a co-signer may struggle to secure education loans from private banks. Some private companies make it their primary mission to loan to international students, but they may require you to study in a certain field (such as STEM) or come from a certain region to obtain a loan.

Students pursuing unsecured loans will need the following:

  • A reliable credit history to prove they can pay back what they owe

  • A minimum credit score of 700+ for most lenders

  • No major derogatory marks on their credit history, like defaulting on a past loan

  • Some method of income verification (e.g. a paystub) or tax returns

  • A low debt-to-income ratio, usually below 40%

Obtaining a secured loan

International students who don’t have an established credit history may still be able to get a bank loan. A secured loan requires a certain asset, such as a car or rare antique, to be put up as collateral in order to obtain the loan. International students can use their secured personal loans for just about any financial purpose, whether it’s paying for books, transportation, or rent. It’s important to understand that failing to pay back a secure personal loan guarantees that you’ll forfeit whatever asset you put up as collateral to obtain it.

Global News actually reported that private loans may feature much better interest rates than government loans in Canada. International students who are concerned about meeting their financial obligations should thus consider private sources of funding before making a final choice. Government loans are often tax deductible and offer delayed repayment options, but this won’t be an advantage to international students who find themselves incapable of qualifying for federal loans.

Students pursuing secured loans will need the following:

  • A valuable asset (or assets) that can be put up as collateral in exchange for the loan; antiques, cars, investments, or future paychecks may qualify as collateral

  • A minimum credit score of 600+ for most lenders

  • Some method of income verification (e.g. a paystub) or tax returns

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Government options for international students

International students may not be able to secure a loan from the Canadian federal government, but their own governments back home may offer some assistance. Students from the United States who are studying in Canada may be eligible for US federal student aid programs, for instance. Provided that you meet the eligibility criteria, an American student studying abroad in Canada (or elsewhere) may find that this federal aid helps them grapple with tuition or everyday costs of living.

Those who aspire to study in Canada one day should thus consult their own federal government websites to see if they may qualify for federal aid that applies even when studying abroad. These loans may not be enough in and of themselves, however, so consider a personal loan or private student loan in order to finance the remainder of your expenses. Housing, transportation, tuition, books, meals, and personal devices like laptops and cellphones can be too expensive to afford on a government federal aid program alone.

Students pursuing a federal loan from the US will need the following:

  • American citizenship or eligible non-citizen status and the documents to prove it

  • A valid social security number

  • A high school diploma, completed home schooling, or a GED certificate

  • Males must be registered with the US Selective Service System

  • A clean criminal record

Secure your future in Canada

Virtually all Canadian universities will check with international students ahead of time to determine if they have enough money to fund their education. Some lenders may offer pre-admission loans that help you meet this criterion, especially if you possess a robust credit score or low debt to income ratio. The amount of money you may need to meet this criterion will depend on where you’re studying and could even be impacted by what degree you’re seeking.

Students who are inexperienced at securing loans should carefully consider their options when assessing private lenders. Some banks and services offer more competitive terms than others, and you want to avoid being burdened with excessive interest rates or inflexible repayment schedules. Talking to your parents or someone you trust about securing a loan from a commercial bank is a great first step for young students who are about to embark upon the educational journey of a lifetime.

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our Subscription Plans page for our most up to date account information!

Ryan Severance

Ryan Severance is a professional freelance author and the owner of American Scribe LLC. With degrees in political science and socio-legal studies, he writes about business, politics, and law for clients around the world.

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