Secured Loans in Canada: Borrowing Against an Asset

What a secured loan is

A secured loan is money you borrow against an asset you own. The lender takes a registered claim on that asset — a home, a vehicle, a savings balance, an investment account — so that if you stop paying, it has something to recover. That claim is the difference between a secured loan and an unsecured one, where the lender's only recourse is your credit file and, eventually, the courts.

Because the lender's exposure is lower, secured lending is generally priced below what the same borrower would pay on an unsecured product. The trade is not a gift. The asset is collateral, and default can mean losing it. A secured line of credit works the same way, except the balance revolves: you draw, repay, and draw again up to a limit the lender sets against the asset.

The secured loan Canada market is really a patchwork. Lending is licensed provincially, so the regulator, the disclosure rules and the paperwork differ by province and territory. Where the lender is federally regulated, consumer complaints go to the Financial Consumer Agency of Canada. loanmoose.ca is not a lender: it does not make loans, set rates or make credit decisions. It is a matching and comparison service for borrowers.

Who it suits

• You own an asset outright, or hold enough equity in it, to pledge as collateral.
• You want a larger amount than an unsecured product would support, or a longer repayment period.
• You have steady income you can document, even if your credit file is thin or carries older damage.
• You would rather use existing equity in something you already own than sell it and absorb the costs of selling.
• You accept that the asset is on the line, and you have a fallback plan for the payments if your income dips.
• You can wait through an appraisal, a title search or a registration step before funds move.

What a lender checks

Four things decide the file: income, existing payments, credit file and security.

Income. The lender wants evidence that the payment fits inside money you actually receive. That usually means pay stubs, notices of assessment, or business financial statements if you are self-employed. A pledged asset does not replace income; it sits behind the promise to repay, and lenders still want to see that the repayment is affordable from ongoing cash flow.

Existing payments. Debts already reported against you are added to the proposed new payment. At federally regulated mortgage lenders, total debt service ratios generally work to a ceiling of about 44%, and an uninsured mortgage is qualified at the greater of the contract rate plus 2 percentage points and 5.25% under OSFI Guideline B-20. Insured mortgages and provincially regulated lenders are not all subject to B-20, so what applies to you depends on the lender and the province.

Credit file. Canada has two national credit reporting bureaus, Equifax Canada and TransUnion Canada, and a free copy of your credit report is available from each. Items such as a consumer proposal, which stays on a credit report for 3 years after completion or 6 years from filing, whichever comes first, and a first bankruptcy, which stays for 6 years after discharge, shape how much weight the security has to carry. A damaged file does not automatically end the conversation on a secured product, but it changes the terms a lender is willing to discuss.

Security. The asset itself is assessed: what it is worth, who holds title, what liens or charges already sit against it, whether the new charge would be first or second, how easily it could be sold, and whether it is insured. At federally regulated lenders, a home equity line of credit is generally limited to 65% of appraised property value, with total secured lending usually capped at 80%.

What it costs to carry

The headline interest rate is only one component of what a secured loan costs.

Interest. Pricing is usually expressed as a margin over a benchmark. The Bank of Canada publishes a policy interest rate, a prime rate, conventional mortgage rates and Government of Canada benchmark bond yields; these are benchmarks, not offers. What you are actually quoted depends on the asset, the loan-to-value ratio, the term, whether pricing is fixed or variable, and your file. Compounding matters too: Canadian fixed-rate mortgages are compounded semi-annually by law, while other products may compound differently, so two similar-looking rates are not always directly comparable.

Fees. Expect to see an appraisal or valuation charge, a title search, legal preparation, a registration fee to place the security interest, a discharge fee when you pay out, and possibly an origination or brokerage fee. Some of these are paid at the start, some at the end, and some are added to the balance where that is permitted.

Insurance. Property insurance on the pledged asset is commonly required, and it is a real ongoing cost. Creditor insurance, which is meant to cover the balance if you die or become disabled, is typically optional and priced separately — ask whether it is required or optional, and what it actually pays.

Headline rate versus total cost of borrowing. The posted rate applies to the balance over time; the total cost of borrowing folds interest and fees into one figure across the actual term. A loan with a lower quoted rate but a short amortization and heavy upfront fees can cost more than one with a higher rate and a longer term. Ask for the total cost of borrowing in writing before you commit, and ask what an early payout would cost.

There is also a legal ceiling on cost. The Criminal Code sets the criminal rate of interest at 35% per year (s. 347). Separately, where a province operates a licensed payday lending regime, the federal Payday Lending Regulations (SOR/2024-114) cap the cost of borrowing at $14 per $100 advanced, though some provinces set a lower cap and the lower cap applies. Quebec does not license payday lending, which effectively prohibits the model there.

How it compares with the alternatives

Option	When it fits	What to watch
Secured loan	You own an asset you can pledge and you want a set amount repaid on a schedule.	The asset is collateral. Registration and discharge fees add to the cost, and the enforcement terms spell out what happens if you miss payments.
Secured line of credit	You want a revolving limit and prefer to draw only what you need, when you need it.	At federally regulated lenders, a home equity line of credit is generally limited to 65% of appraised property value, with total secured lending usually capped at 80%. Interest-only payments can leave the balance sitting for a long time.
Unsecured personal loan or credit card	You have nothing you are willing to pledge, or the amount you need is small.	No asset is at risk, and pricing usually reflects that. Check how interest compounds and how minimum payments stretch the term.
Payday loan	A small, short-term gap that nothing else covers, where you have no asset to pledge.	A payday loan is generally up to $1,500 for a term of 62 days or less. Where a province operates a licensed regime, the federal cap is $14 per $100 advanced, a lower provincial cap applies where one exists, and Quebec does not license the model.
Selling the asset or saving instead	Your timing is flexible and the asset is straightforward to sell.	You may face selling costs and tax consequences, which are matters for a tax professional, and you give up the asset's future value.

Before you sign

1. Get every number in writing: the amount, the term, the interest rate and how it compounds, each fee, and the total cost of borrowing as disclosed to you.
2. Confirm exactly which asset is pledged, whether the charge is first or second, what events allow the lender to enforce, and what a discharge costs when you pay out.
3. Ask about prepayment: whether you may pay early, how any penalty is calculated, and whether fixed and variable pricing differ on that point.
4. Pull your credit report from both national bureaus, Equifax Canada and TransUnion Canada, since a free copy is available from each, and correct errors before you apply so you see what the lender sees.
5. Confirm which regulator licenses the lender in your province and where a complaint goes, then write down how you would cover the payments if your income dropped, because the pledged asset is at risk.