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As the largest city in Southern Alberta, Lethbridge is becoming a more popular place to live by the year. Although that makes it a relatively expensive area as well, residents of the province earn some of the highest wages in Canada. That said, your own daily expenses may be too large for you to handle with your credit cards and income alone.
If that’s the case, diversifying your financial tools with a loan can be a step in the right direction, helping you manage your living costs and become a more responsible borrower in the process. Keep reading to learn more.
How to get the best personal loan for your needs this year, click here.
Loan Types for Credit Users
While there are several different loan products available through various lending sources in Lethbridge, generally speaking, a loan is a lump sum of money that you can borrow if you’re qualified, then pay back over time through installments with interest. The loan type you choose will depend on what your financial situation looks like and what kinds of expenses you’re trying to finance.
There are loans for specific purposes (car loans, mortgages, etc.) and loans that are simply liquid cash (personal loans, short term loans, etc.) so that you can pay for whatever you need. Some loan types even come with the option of using security in order to receive more credit at a better interest rate.
Depending on where you apply and what kind of loan product you want, some lenders in Lethbridge will allow you to offer collateral to secure your loan. This must be an asset that you own, such as your house, vehicle, or other valuable property. The more valuable the collateral, the more money you can secure and the lower your rate will be as a result, making this a good option for those that have a lower income or bad credit.
Essentially, by offering collateral, you’ll be giving your lender an insurance policy in the event that you go into loan default (for more information about loan default, click here). If you miss too many payments in a row and don’t attempt to rectify the situation, they have something to sell to recuperate their loss. The more risk you can reduce for them, the better the results for your loan will be.
If you don’t have or don’t want to jeopardize an asset, you can also apply for a regular unsecured loan. However, since there will be more risk imposed on the lender, it’s better to apply when you have a good job/income and a low amount of outstanding debt. The easier it is for you to pay your installments as they’ve been assigned, the larger and less expensive your loan may be.
Read this for some information about unsecured personal loans with good credit.
Although every lender in Lethbridge has different standards for the clients they can approve, if you don’t have great finances, decent credit, or collateral, it can be a good idea to find a stronger borrower to cosign your loan application. This could be a friend or family member but will have the same positive effect.
That said, your cosigner must be fully aware that they would be agreeing to take over your loan payments if you default. As this could put serious strain on both of your financial profiles, only use a cosigner that’s comfortable with that kind of responsibility.
Do you know what the true cost of borrowing is? Find out here.
The Importance of Your Interest Rate and Credit Health
No matter what type of loan you apply for or how much cash you request, it’s essential to try and get the lowest interest rate possible. After all, the less interest you pay over the life of your loan, the more money you can potentially save and use for other costs.
Your Interest Rate
Interest rates are what lenders charge you to borrow money from them. As we mentioned, the best way of securing an affordable rate is to reduce the risk that the lender is taking when they approve you. While you can do this by offering up collateral or a cosigner, you can also achieve this goal simply by having healthy finances.
The length of the loan repayment term you choose will also cause your interest rate to fluctuate. Since the lender needs to maintain a profit, the shorter your term is, the higher your interest rate will be. That said, the longer your term is, the more interest you’ll pay over time. Always properly factor your interest rate into your monthly budget before you attempt to take on the responsibility of a loan.
Click here to learn how a short term loan can help you tackle any expense.
Your Credit Report & Score
Although there are many lenders in Lethbridge that don’t check your credit when you apply, most lenders will also use your credit report and score to decide your approval chances, loan amount, and interest rate (click here to find out which credit bureau lenders check). The healthier your credit looks, the more favorable the results.
Your credit report is a detailed personal profile that contains records of all your credit-related actions over the past decade or so. All lenders in Lethbridge who work with either of Canada’s major credit bureaus (Equifax or TransUnion) have the ability to check your report when you apply for new credit. By looking at your report, a lender can view your payment history and current debts, thereby getting a better idea of how responsible you’ll be with the loan that they’re potentially about to approve you for.
Your credit score, on the other hand, is a more basic representation of your creditworthiness. Typically ranging from 300 – 900, a score above 650 is usually a sign that you’re good at managing your credit products and will continue to do so in the near future. This will, of course, help you access a larger loan amount and a more reasonable rate to go with it.
Take a look at this infographic to learn more about credit scores in Canada.
How to Identify a Loan Scam
When it comes to a loan, your financial health, repayment term, and credit are all essential factors to consider. It’s also extremely important to consider how legitimate the source of your loan actually is. Before you apply, you must be careful and do proper research to ensure that your loan source is a reputable one. This way, you’ll be a lot less likely to fall for a loan scam, which can occur in several ways.
For instance, even though they may hold valid business licenses, there are many predatory lenders in Lethbridge and Canada, in general, who will charge you ridiculous rates for otherwise unfavourable loan products. What’s worse, there are also many fake organizations looking to scam you out of your money and steal your identity to commit fraud. This is a particular problem for borrowers in Lethbridge who can’t get approved due to bad credit and/or unhealthy finances.
Do not trust any “lender” that…
- Attempts to charge you more than the legal interest rate limit in Alberta ($15 per $100 borrowed).
- Does not have good customer reviews, a confirmable address, license to operate, and/or page in the Better Business Bureau database.
- Refuses to answer your questions properly or tries to coax you into giving away your online banking login information.
- Does not clearly display the costs of their products through advertisements and/or within their contracts.
- Demands a payment before they actually deposit your loan (they may call this “loan insurance”).
Need debt relief from predatory loans? Click this link.
Getting Approved for a Loan in Lethbridge
During your search for the right loan, you’re likely to come across a variety of lending sources in Lethbridge, each of which has a different way of approving their clients.
For example, prime lenders in Lethbridge, like banks and credit unions tend to have higher approval standards but can offer a whole range of loan and credit products. Due to their larger status, a prime lender can often approve you for more credit, lower rates, and better repayment plans.
On the other hand, subprime sources in Lethbridge like alternative, private, and bad credit lenders can have easier qualifications for one or two few key products that they market. At these locations, your credit will be less of an issue. Lenders will instead focus on your income and current debts. Although you may receive less credit at a higher rate, you can use your loan payments to elevate your credit score and eventually apply for a prime loan.
All this said, what every lender wants to know, first and foremost, is that you’re financially strong enough to afford any payments, rates, and fees associated with the loan you’re applying for. No matter where you apply, good financial strength is the key to getting a larger loan with more favourable conditions all around.
Before you apply, make sure you…
- Have a steady job that allows you to earn and save as much income as possible.
- Pay off any outstanding debts you have.
- Check your credit report for errors, fraud, and identity theft.
- Build and/or improve a good credit score.
- Gather and update any personal/financial documents that your lender requests.
- Offer some valuable collateral (optional)
- Find a strong cosigner (also optional)
To discover some ways of improving your credit score this year, check this out.
Looking for a Loan in Lethbridge?
No need to worry, because Loans Canada can help you find it. That’s right, it’s our mission to connect you with the best lenders, loan products, and rates in Lethbridge. All you have to do is apply below or contact us for more information!