Personal Loans Ontario
Save time and money with Loans Canada
Written by Bryan Daly
Best Personal Loans Ontario 2020
What is a personal loan? Good question! A personal loan is a lump sum of money provided by a lender. It can be a very effective financial tool when you use it wisely. The more timely, full payments you make, the more your credit will benefit from it. And when you have good credit under your belt in Ontario, the possibilities are near endless. You want to apply for vehicle financing or a mortgage someday? Having healthy credit is the first step and a personal loan is one of the best ways of achieving that goal.
Does paying off your credit card bills increase your credit score? Find out here.
Aren’t Credit Cards a Better Choice?
Not always, depending on what financial situation you’re experiencing at the moment.
Credit Cards Can Be Good For:
- Purchasing less expensive consumer goods
- Allowing you 30 days before you actually have to make a payment
- Added benefits, such as travel insurance, reward points and discounts (depending on your card type)
Credit Cards Can Be Bad When:
- You stop making full payments. While sticking to minimum payments (or just above) will help you avoid penalties, it can lead you into a never-ending cycle of debt. For every dollar that goes unpaid, you’ll be charged interest.
- You stop making payments completely. Doing this will surely ruin your credit and could eventually cause your credit bureau to put your account in charge-off status. This may be closely followed by contact from collection agencies, maybe even legal action and wage garnishment.
Not sure how bad credit affects your daily life? Look at our infographic.
Why Are Personal Loans Better?
It is true that defaulting on your personal loan payments can lead to similar consequences, as it is with almost any credit product. However, personal loans are better than credit cards in a few ways, including:
- They allow you the opportunity to pay for whatever you want, possibly larger expenses than your credit card limit or current income will allow
- They usually come with lower interest rates than most credit cards
- You’ll get your money in one lump sum, so you’ll know in advance exactly how much you would pay by the end of your loan term
- Most personal loans are offered with different payment period options (monthly, semi-monthly, weekly, bi-weekly, etc.)
- You may have the choice of using your assets (home, car, or other property) as collateral to secure your loan, possibly earning you an even better interest rate
What Can a Personal Loan Be Used For?
As we mentioned, pretty much any expense you can think of. Personal loans come in the form of cash, deposited directly into your bank account (ask your lender about their payment procedure). You could even pay for:
- An expensive vacation for you and/or your family
- The cost of you or your children’s education
- Cosmetic surgery or other elective medical procedures
- Repairs for your car or any other automotive expenses
- Repairs or renovations on your home
- Paying any other bills (utilities, cell phone, internet, etc.)
How Large of a Loan Will Be Available?
The size of the personal loan that will be available to you depends on a number of elements, including but not limited to:
- The quality of collateral (valuable assets) you offer if any
- The regulations and procedures your particular lender follows
- How easily you’ll be able to afford your loan payments, based on the state of your income, bank account, and credit
- The state of your cosigner’s finances and credit (if you plan to use one)
Can’t make your loan payments on time? Read this.
Where Do Credit Scores Factor In?
Your credit score is three digits, ranging from 300-900, and sums up your behaviour as a credit user. Lenders often examine your score as part of their application procedure to determine your creditworthiness, i.e. the probability that you will fail to pay your personal loan in full by the scheduled due date.
What happens when you pay off your loan as agreed:
- Your lender reports your positive activity to Equifax and/or TransUnion (Canada’s main credit bureaus)
- Your credit score will rise with every timely, full payment you make
- Your rising score makes your whole credit profile look better
- Your good credit profile can lead to higher approval chances for other valuable credit products you apply for in the years to come, such as mortgages
Want to know what the average Canadian credit score is by age? Click here.
What Credit Score is Needed to Receive Loan Approval?
Normally, a score of 650 or above signals that your credit is solid and gives you the best opportunity for approval in Ontario, as well as a favorable interest rate. Depending on your lender, a score below that level may still be acceptable. However, your interest rate might end up being higher, ultimately making the loan more expensive over time.
Can you get approved for a loan when your credit score is 450? Here’s the answer.
What Aspects Do Lenders Typically Inspect?
You already know that many lenders will inspect your credit health before approving your application. They’ll also be looking at:
- Your bank statements from previous months/years
- Your income
- Your employment history
- Your current and previous debts
- Any other aspects of your financial livelihood that would help them get an idea of your ability to repay your loan
What Does Loans Canada Recommend?
Before you apply, it’s best that you prepare for the application procedure, so the whole process will go smoothly and you’ll look better in your lender’s eyes. You should:
- Study your own credit report and credit score (both can be provided by Canada’s credit bureaus)
- Take measures to improve your credit if it’s not already healthy (good payments for other accounts, disputing informational errors, etc.)
- Pay off all your other pending debts and don’t rack up any more unnecessarily
- Gather your essential financial documents and making sure all relevant information is accurate
- Know in advance how much you’d like to borrow
- Get a quote from your lender. Ask how much your loan might cost you over the length of your payment period (always factor in your interest rate!)
Click here to see how applying for new credit affects your credit score.
Apply Today for a Better Tomorrow!
If you want a personal loan to pay for something essential, the time to apply is now. Loans Canada is always here to help get you set up with the right lender in Ontario.