Can I borrow money from the government?

Whether you need to pay off school expenses, are considering debt consolidation, or have other financial needs, there are numerous reasons why you may need to borrow money. While most of the time Canadians turn to banks and credit unions for financing options, what a lot of people don't know is that you can also borrow funds from the Government of Canada.

If this is something you're interested in, stick around to learn more about government loans below. You can also use our Government Benefits Finder to discover the programs best suited for you!

Federal government loans available

Currently, there are a couple of different types of Canadian loans offered by the government:

Student loans

If you're considering post-secondary education, you can apply for student loans directly from the Government of Canada to help cover the cost of your tuition, textbooks, and other expenses during your time as a student.

Mortgages

For those in Canada looking to purchase a home, there are also government mortgages you can acquire as opposed to borrowing money from a bank or credit union.

Small business loans

Small business loans for businesses across the country can also be funded by the federal government or special government programs including the Canada Small Business Financing Program, Export Guarantee Program, and more.

Why get a government loan

So, why would someone consider a government loan compared to getting one through a traditional route with a bank?

Lower interest rates

Generally speaking, government loans and programs offer more flexibility when it comes to borrowing money. In most cases, you'll be able to repay your loan debt interest-free, which you won't be able to do if you choose to get a loan with a bank or by using credit card companies for funding.

Flexible repayment terms

Another reason why you may want to consider a government loan is more freedom with your repayment terms in the sense that your loan won't need to be repaid as quickly as it would if you were to go another route.

Advice on your projects

Partnering with the government also comes with the benefit of getting advice and guidance on your business ventures or home improvement projects, including strategic planning, which is not available otherwise.

What to consider before getting a government loan

While government loans can be a great choice for a lot of Canadians, there are some things you need to be aware of before applying for these types of loans:

Difficult application process

Competition for funds tends to be high with government loans, making the application process more difficult. Additionally, similar to how you may not be able to get a personal loan with bad credit, to qualify for government funds, the approval parameters are often more stringent.

Aren't sure where your credit score stands? Get a free credit score check and build your credit with KOHO by opening a virtual credit card!

May not fully fund your needs

Depending on your plans for spending and saving, you may not receive the full funds you ask for should you qualify for a loan in the first place. To ensure that you can pay for your expenses in full, we recommend you start building savings as soon as possible by opening a high-interest savings account with overdraft protection coverage and using a 5-step budgeting guide to manage your finances.

You won't get the money instantly

Lastly, unlike traditional bank loans, the money won't be deposited into your bank account right away. In most cases, you'll need to apply for a reimbursement, which can take some time.

Alternatives to government loans

If you're unsure whether government loans are the way to go, you may want to consider a grant that's available through local governments. Unlike loans, you won't need to repay the money you receive.

Alternatively, a personal line of credit is another option available to students, homeowners, business owners, and those looking for a loan in general. Personal credit lines work similarly to credit cards, and you are only charged interest rates on the amount you borrow. Realistically, you can borrow money and pay it back continuously for as long as you wish, up to your credit limit and as long as your account remains in good standing.

Got financial goals? KOHO's got solutions

With numerous financial products tailored to everyday Canadians, KOHO is a leading choice for those looking to take control of their finances and enhance their financial literacy.

Whether you want to learn about the differences between secured vs unsecured debt, what to do when interest rates rise, or other topics, KOHO is your one-stop-shop for your financial needs, wherever you are in Canada.