You may need to borrow some money from a reliable source to purchase a new home or a car, to consolidate your credit card debt, to pay off holiday or wedding expenses, to cover medical expenses or to fund some repairs or improvements.
If the amount you need costs more than a short-term loan could afford, you can consider applying for a personal loan.
How To Get A Personal Loan In Canada?
While deciding whether you are eligible for personal loans in Canada, lenders consider 5 main factors including your income, your employment, Credit history, loan security, your assets and your debts/expenses. These factors also impact the interest rate you will be charged if the lender finds you creditworthy and decides to provide you a personal loan.
Interest Rates Of Personal Loans In Canada
Interest rates of personal loans are much lower than interest rates of credit cards. For example, while some personal loans may have 5.6% interest rates due to your credit report, credit cards usually come up with around 20% interest rates.
To get a personal loan with an affordable interest rate and better conditions, you should have an excellent/good credit score which is generally over 650. Secondly, the lower debt-to-income ratio you have, the lower interest rate you will be charged. Also, a history of bankruptcy may increase the interest rate you will get. Lastly, since interest rates may differ among the lenders, you should shop around to find the lowest interest rate.
Types Of Personal Loans In Canada
There are 3 main types of personal loans in Canada:
- Unsecured Loans,
- Secured Loans,
- Reverse/Cash Secured Savings Loans.
Since most lenders find them risky, unsecured loans are generally more difficult to be qualified and have higher interest rates compared to the secured ones. To receive a secured loan, you need to offer up an asset as security. Secured Loans often have lower than normal interest rates as you reduce the risk by pledging collateral. But, you need to complete your repayments monthly if you do not want to lose possession of your asset.
Lastly, a Cash Secured Savings Loan can be a good option if want to build your credit score. That type of loan allows you to borrow the amount you had deposited before, as a loan.