Our nation’s capital was officially renamed from “Bytown” to “Ottawa” in 1855. It has a population of just under 935,000 residents, making it the fourth most populated city in Canada. Resting on the southern bank of the Ottawa River, the city is also known to be the most educated area in the country because of the number of citizens who hold university degrees.
Look here to know some fun facts about loans, credit, mortgages, and financing in Ottawa.
The Ottawa Valley, which first became livable after the draining of the Champlain Sea some 10,000 years ago, has been home to indigenous societies for over 6,500 years, making it a focal point of archaeological study and excavations. Spanning over three weekends in February, Ottawa is the host of Canada’s most popular festival, Winterlude. The festival attracts hundreds of thousands of tourists, who come to enjoy various winter attractions, such as ice sculpture competitions, the H2Orchestra, and the Rideau Canal Skateway, the largest skating rink in the world, spanning over 7.8 km. Every Canada Day, hundreds of thousands will also gather to watch the celebrations on Parliament Hill.
For information about loans in Ontario, check this out.
Ottawa has a number of places where you can get the loan you need. However, there’s an unfortunate amount of misinformation floating around concerning the loan process. It’s important to separate fact from myth if you’re thinking about applying for a loan. Here are some of the more common loan myths that you might’ve heard:
- You need a high credit score or you will be rejected. Not to worry, while a favorable credit score is always an asset, many lenders will not use it as a deciding factor. What they are looking for is a record of financial stability. Want to know the average credit score in Canada by age? Take a look at this article.
- Every lender charges the same interest rate. Actually, interest rates are likely going to vary from lender to lender, so make sure to do a lot of research before signing any contracts.
- Paying off your loan quicker is the best idea. Depending on the size of your loan, paying it as quickly as possible will help you get out of debt faster. However, depending on your income and savings, it might not be the best idea financially because you could use up all your money and not have anything left for other essential expenses.
- Loans are only for people who have full-time jobs. Another myth. While having a stable source of employment will help you pay your loan faster, a lender won’t necessarily reject you based on the amount you work. As long as you can afford your monthly payments, you should be able to find approval. Searching for a loan that doesn’t require an employment verification? Try reading this.
- All lenders are reputable and their only goal is to help customers. Unfortunately, there are many fake lenders in every city that seek to scam you out of your hard-earned money. That’s why it’s extremely important to look at customer reviews and research your chosen lender properly before committing to them.
Preparing to Apply for a Loan
The loan process can take time and effort to complete properly. On top of that, financial instability and disorganization are surefire ways to get your application rejected. To help the application process go well, prepare your finances for inspection. Have all your important documentation updated and ready to be reviewed. You can also complete these other tasks:
- Perform a credit check before you apply. Something that you should do at least once a year anyway, performing a credit check is a good way to get an idea of your financial stability.
- Work out the amount you need to borrow and how much you’ll be able to afford in future payments. Loans can come in all amounts. Get an estimate of how much you’ll need to borrow to finance your purchase, then compare it to your savings. Can you still realistically afford your loan and your other general expenses? What if a financial emergency arises? A loan you can’t afford will only cause further money problems down the line.
- Find a lender with reasonable interest rates. Part of determining the affordability of a loan is knowing what a lender will charge in interest per month. Make sure your lender’s interest rates are suitable for your finances. Wondering if there’s a way to beat your lender’s interest rate? Find out here.
- Decide whether you need a “secured” or an “unsecured” loan. A secured loan will likely be larger, like a mortgage or a car loan. In this case, your purchase will be used as collateral, should you stop making payments on time and in full. An unsecured loan, such as a typical credit card, does not involve collateral but can result in legal actions of a collection agency if payments are not made properly.
Do you know what your credit score range means? Check out this article for more information.
Loans and Your Credit Score
If you have a low credit score prior to applying, don’t give up. As we said, there are many lenders in every Canadian city that will not take your credit score into consideration before approving your application. What they’re really going to be checking are your finances. So, if you have a record of debt issues and financial irresponsibility, your chances of getting a loan are certainly going to drop. However, if a lender can determine that you’re stable and responsible enough to afford their payment schedule, the likelihood of you getting approval will rise.
However, an extremely important thing to know about a loan is that once you have been approved, your credit score is going to change in various ways. For instance:
- Responsible payment of your loan (payments are on time and in their set amounts) will cause your credit score to increase and improve your credit.
- Irresponsible payment of your loan (late payments, low payments, or missed payments) will cause your credit score to decrease and harm your credit greatly.
Keep this in mind before you apply. If you think you won’t be able to afford loan payments in the future, it might be better to wait until your credit score rises and you become more financially stable. Also, it’s important to select a lender that is going to report your payments to Canada’s main credit bureaus, Equifax and TransUnion.
Read this to gain a better understanding of Canada’s credit reporting agencies.
FAQ’s (Frequently Asked Questions)
- What can I do to help improve my chances of getting approved? There are a few different things you can do, such as:
- Before applying, check your credit. As we said, checking your credit will help you decide if you are financially stable enough to take on the loan debt.
- Do advanced research. Remember, there are scam artists out there, so research is important. Make sure a lender is legitimate and listed in the B.B.B. (Better Business Bureau) database.
- Consider an online lender. An online lender might suit your needs better than a traditional financial institution.
- Prepare your important documents. The application process will be less stressful if all relevant documentation is organized and up to date.
- If you have any previous debts, pay them off before applying. A loan will certainly add to your debt load, so paying any other debts you already have, such as credit card bills, is a top priority. Will paying off a credit card bill help you increase your credit score? For the answer, click here.
- Will I be rejected if my credit score is low? No. While most banks will factor in your credit score before approving or rejecting your loan application, many lenders will not. Being in good financial health is the best way to get approved.
- How will my credit score be affected by approval? As we stated in the section just above, your credit score will change according to your history of loan payments. Late, short and missed payments will affect your score negatively. On-time and complete payments will affect your score positively. To discover the ways your credit score is affected by your payment history, read this.
- Which is the better method of payment? A loan or a credit card? Depending on the expense you’re trying to finance, each method has its benefits and drawbacks. Cheaper expenses like consumer goods can be paid for with a credit card, as long as you can finance the monthly bills with your income. Larger expenses like cars and houses can cost tens, if not hundreds of thousands to finance completely, so a loan will probably work best.
- Will a lender still let me borrow if I have no credit history? Having a credit history means that you’ve used a credit product previously, like a credit card. However, while a good credit history is a great help, it’s not a necessity for your loan application. Look at this if you want to know how the length of your credit history affects your credit score.
- Why does my bank reject all my applications? Banks are businesses like any other. They will often have a more strict set of guidelines to follow to avoid losing money should a borrower fail to make payments. A low credit score or a record of financial problems could cause them to reject an application.
- I talked to a lender who asked for a deposit before approving me. Does every lender do this? No, they do not! Actually, if a “lender” asks for a deposit before approval, it’s a sure sign that they are illegitimate and attempting to steal your money. No certified lender will ever ask for money upfront because it is illegal. If this happens, cut off all contact. Don’t give them any more information about yourself or your finances. To learn how you can spot a loan scam, watch this.
- When can I expect to receive my loan? Usually 24-hours to several business days later, depending on how efficiently you’ve completed your application and what type of loan you applied for.
- If I have the extra money, can I make loan payments ahead of their scheduled periods? Unfortunately, early payments will cause a lender to earn less in interest fees, so many will not allow them. If they do allow early payments, they might charge a penalty to compensate for their loss.
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