BDC clarifies definition of personal loan

The Business Development Bank of Canada (BDC) has provided a detailed explanation of personal loans, also known as consumer loans. These loans are designed to help individuals cover various personal expenses, such as consolidating debt or financing home renovations.

According to BDC, all personal loans share three common elements: evidence of the debt, like a promissory note; the amount borrowed (principal); and the cost of borrowing in the form of an interest rate. Once the repayment terms of a loan are met, the promissory note is retired. If loan payments are not made as agreed, the lender can use legal means to recover the funds.

While mortgages for homes or cottages fall into the category of consumer loans, they are not typically referred to as personal loans. BDC outlines that personal loans can be repaid in numerous ways, offering flexibility to borrowers.

This clarification provides the public with insight into the structure and terms of personal loans, supporting broader financial literacy. BDC continues to offer guidance to entrepreneurs and individuals on financial matters.