The Loans Canada team sits down with Gary Schwartz of the Canadian Lenders Association to talk about open banking.
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Written by Bryan Daly
Best Loans Hamilton (Online) September 2021
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Note: Loans Canada does not arrange or underwrite mortgages or any other financial service. We are a simple referral website that provides free educational resources to help Canadians make better decisions.
With a population of over 540,000 residents, Hamilton is one of the largest cities in Ontario. Although the city’s popularity has been increasing gradually in recent years, so has the average cost of living, which can be said about most urban areas in Ontario.
When that happens, it’s good to have a backup payment method that ranges beyond credit cards and cash. This is where loans play an important role. If you’re thinking about applying for a loan in Hamilton, keep reading, we have all the information, tips, and advice you need.
Where to Find the Right Loan
Generally speaking, a loan is a product that you can apply for through various lending facilities and when approved, involves a lump sum of money being sent via direct deposit, cheque, or e-Transfer.
Although conditions will vary depending on where you apply, your financial aptitude, and how much money you request, you would then typically repay the borrowed amount through equally divided and scheduled installments with interest. Some lenders will also give you the option of repaying them early through larger or more frequent increments so that your debt ends quicker.
That said, the average loan in Hamilton can take anywhere from several months to several years to repay in full. When applying, there are two kinds of lenders that you can visit.
Banks, credit unions, and other top tier financial institutions, otherwise known as ‘prime’ lenders are usually more likely to offer you larger loans with better repayment plans and often lower rates than some subprime lenders. However, getting approved by a prime lender can be more difficult.
Do you know the difference between a credit union and a bank? Find out here.
This is because prime institutions have more strict standards when it comes to the clients they can approve. While this may also depend on how much money you’re trying to borrow, most banks and credit unions require you to have a decent income and credit score, and a low amount of outstanding debt before they’ll approve you. If your financial health is below their standards, you may even need some security, such as a cosigner or collateral.
For any lender, particularly a prime institution, your approval odds are all about risk assessment. Essentially, the more chance you have of completing your payments as agreed, the easier it will be to get approved for a favorable loan (and vice versa).
If you can’t get approved by a bank or credit union, there are plenty of private and alternative institutions that you can apply within Hamilton, otherwise known as ‘subprime’ lenders. As you can imagine, your borrowing options may be slightly more limited here, as loans will be smaller and higher rates will apply.
That said, it will usually be much easier to qualify with subprime lenders, making them perfect sources for borrowers who have lower incomes, more unpaid debt, bad credit, or have experienced some kind of financial hardship. There are even bad credit lenders who will approve you following a recent consumer proposal or bankruptcy.
Once again, the more risk you pose, the less favorable your loan will be in terms of its overall conditions. Nonetheless, if you apply with a lender that reports to Canada’s credit bureaus (Equifax and TransUnion), any subprime loan payments you complete will actually benefit your credit score and financial profile (prime loans will do the same).
Do you know what a loan origination fee is? Find out here.
How to Identify a Loan Scam
When it comes to any credit product, loans included, it’s always important to know where your potential financing will be coming from once you’re approved for it. Though there are plenty of lawful prime and subprime lenders across Canada, there are also many predatory organizations and scam artists lurking in the shadows.
Predatory lenders may hold some legitimate business credentials but will often charge illegal interest rates on less than great loans. Scammers are even worse as they are not real lenders at all and will create fake companies so they can steal your money and identity to commit fraud.
Don’t worry, it’s possible to spot a predatory or fake lender if you do some advanced research and make sure you’re well aware of the red flags that indicate a scam.
Never give any of your personal or financial information away if your lender:
- Does not have a real address, valid business license, and/or listing with the Better Business Bureau.
- Charges rates that are higher than Ontario’s legal borrowing limit (15% or $15 per $100 borrowed).
- Demands “loan insurance”, your credit card number, or another form of payment before they’ll deposit your money.
- Uses aggressive or manipulative sales tactics.
- Threatens you or contacts you outside of legally designated hours for payment.
- Does not have a good reputation and has bad or obviously fake reviews.
- Claims they will 100% guarantee to approve you, no matter who you are.
If you’ve recently been scammed, had your identity stolen, or would like to know more about avoiding these kinds of incidents, contact your local authorities and The Canadian Anti-Fraud Centre immediately.
Getting Approved for a Favorable Loan
Remember, much of your approval chances will weigh upon the level of risk you pose to your potential lender. While every lender has a different way of doing business, the main way to get approved for a large and/or reasonably priced loan in Hamilton is to present good financial stability when you apply.
In fact, the average lender will likely examine your gross monthly/yearly income, your current debts, and even your credit report before they’ll consider approving you. So, before you apply, it’s important to ready yourself for the application process. The more creditworthy you are, the better the overall results for your loan will be.
Make sure you take the following precautions:
- Make sure you’re able to repay your loan
- Organize any required proof of your financial ability and Ontario residency (paystubs, bank statements, etc.).
- Create a realistic budget that fits your lifestyle
- Pay down or consolidate any outstanding debts you hold.
- Request a copy of your credit report from both Equifax and TransUnion (free once per year) and make sure that all the information is correct
- Work to improve your credit score by always making timing payments
- Avoid applying for too much new credit all at once (hard inquiries into your credit report can damage your credit score).
- Fill out your application honestly and completely when the time comes.
If your financial health is insufficient or you’d like to earn more credit with a better interest rate, you can also:
- Offer assets as loan security/collateral
- Find someone with stronger finances to cosign your application
Will cosigning a loan affect your credit score? Check out this article to find out.
Getting an Affordable Interest Rate
When you’re thinking about applying for a loan in Hamilton, it’s also essential to factor the lender’s interest rate into your budget before you get started. Interest is what lenders charge in exchange for the money they approve you.
Since this rate can significantly add to the overall cost of your loan payments, it’s not only important to prepare yourself for that added financial strain, you must also try to get approved for a low rate so you can save as much money as possible.
Once again, you can typically accomplish this by strengthening your financial profile and reducing the risk for your lender. Though offering collateral and/or a cosigner is another way of getting the job done, it can also help to have a good credit score of 650 – 900.
With all these strengths in tow, you’ll have the best odds of getting approved for a favorable loan at a reasonable price.
The Difference Between Secured and Unsecured Loans
Now that you have a good understanding of what a loan is, it’s time to decide what kind of loan you actually want to apply for.
There are many different loan types available in Hamilton and the rest of Canada, such as mortgages to purchase homes, vehicle loans to purchase cars and trucks, and consolidation loans to pay down consumer debt. There are also more traditional installment-based loans, which are plain liquid cash and can, therefore, be used to cover a multitude of expenses.
You’ll also have to decide whether you want to apply for a ‘secured’ or ‘unsecured’ loan. Both of these loan types can affect your financial profile negatively and positively under the appropriate circumstances, so be sure to consider your final decision carefully.
In order to apply for a secured loan in Hamilton, you’ll have to have some form of security to offer your lender, such as collateral or a cosigner. In terms of collateral, this could be your house, vehicle, or other personal property that you own the title to and that has some residual value. As mentioned, a cosigner would be a stronger borrower that agrees to take over your loan payments if you cannot afford them.
Either way, the loan will be secured against that offering, effectively lessening the risk your lender is taking. As a result, you’ll once again be able to qualify for a larger loan with a lower interest rate.
Nonetheless, you must always be careful when offering loan security. If you should default on too many payments and you’ve offered collateral, your lender will have the right to sell your asset to recuperate the money you owe. If you applied with a cosigner, they will become responsible for your debt and their own financial profile will be in jeopardy if they also go into default.
Did you know there are more than 20 ways to secure a loan? Learn more here.
If you don’t have or don’t want to endanger your assets or cosigner, you can also apply for a more basic unsecured loan. Although your lack of security may hinder your ability to get approved for a large loan and possibly even raise your interest rate, it is still a safer option simply because you won’t lose any properties or jeopardize the finances of someone close to you.
Thinking of Applying For a Loan in Hamilton?
If so, you’ve come to the perfect place. When you apply with Loans Canada, we’ll swiftly connect you to the best lenders in your area. Submit an application below to get the process started today.