These days, there’s no need to visit your local bank branch to apply for a loan. If you’ve got access to the internet, you can apply for a loan online through your computer, tablet, or even your mobile phone. Even better: you can get approved for your loan online and get access to your funds within a day or two, and sometimes even faster.
Online loans have become very popular among consumers thanks to their convenience, speed, and easy approval process. Read on to find out why you may want to consider an online loan and how to apply for one.
The easiest and fastest way to get a loan in Canada is to apply for an online loan. These types of loans are particularly convenient when an urgent expense pops up and you can’t afford to wait days or weeks for loan approval and funding. With online loans, you can get quick approval and have the funds deposited into your account within hours.
Online loans are typically available from alternative lenders. Their application process is typically quite simple, and all required documents are uploaded via the internet with no need to physically visit a brick-and-mortar location.
Moreover, getting an online loan can be much easier than applying with a bank as they tend to have lower requirements. Many online alternative lenders work with borrowers who have bad credit or poor finances.
To apply for an online loan, follow these steps:
Before applying with an online lender, be sure to pre-qualify with multiple lenders first. This will allow you to compare what type of loan you can secure based on your situation. Moreover, the pre-qualification process only requires a “soft” credit check to help the lender gauge your creditworthiness, which won’t negatively impact your credit score.
From the list of lenders and loan options you have available to you, choose one that best suits your needs and comes with the most affordable rates and favourable terms. Be sure to also compare funding times if you need the cash urgently.
The lender will need specific documents to verify your creditworthiness and identity. You can upload these documents and submit them electronically. This may include a government-issued photo ID, bank statements, pay stubs and other related documents.
Fill out the loan application in full and make sure all information is accurate. Read over the application to make sure you understand everything about the loan and your responsibilities, then submit it. You should receive approval shortly after, and the funds will be deposited into your account within 24 to 48 hours (via direct deposit or e-Transfer), depending on the lender.
The documents that are typically required when applying for a loan in Canada include the following:
You can apply for a variety of different loan types online, though the more common online loans include personal loans and payday loans.
An online personal loan is a type of financing that provides you with a lump sum of money, which you will be required to pay back in regular installment payments. Loan amounts for online personal loans typically range from $300 to $35,000, with terms ranging between 6 and 60 months.
Funds are provided via e-Transfer or direct deposit and payments are typically automatically withdrawn from your bank account. You can choose the payment schedule and frequency, such as monthly, bi-weekly, and weekly.
Online personal loans are accessible to all types of borrowers including those with bad credit. While interest rates may be more expensive than that of a traditional bank, it’s a much more affordable option than payday loans; another type of online loan.
An online payday loan is a short-term financing option for those in need of quick cash but who can’t qualify for a regular loan due to bad credit or poor finances.
Unlike personal loans, payday loans must be repaid in one lump sum rather than in installments. They’re called “payday loans” because the loan amount, plus interest, must be fully repaid by the time you receive your next paycheque, which is usually between 14 to 30 days after taking out the loan.
Payday loan amounts are much smaller than personal loans and typically range between $100 to no more than $1,500. Interest rates for payday loans are among the highest in the lending industry, with APRs as high as 546%. Considering the sky-high costs of payday loans, they’re only meant to be used as a last resort when a financial emergency arises and you’re unable to access other forms of credit.
Your loan cost can be affected by a number of factors including the loan amount, loan term, interest rate and fees. Below is a table that depicts how the cost of your loan can be affect by the interest rate.
| APR | Monthly Payment | Total Interest | Total Cost |
| 10% | $87.92 | $54.99 | $1,054.99 |
| 20% | $92.63 | $111.61 | $1,111.61 |
| 30% | $97.49 | $169.85 | $1,169.85 |
| 40% | $102.47 | $229.66 | $1,229.66 |
It’s important to understand the perks and drawbacks of online loans before deciding whether or not to apply for one rather than applying with a traditional lender:
Before settling on a particular lender and loan product, make sure to do a little due diligence and compare lenders first. Here are a few tips to keep in mind when choosing an online loan:
Your credit score is a key metric that lenders look at when deciding whether or not to approve a loan application. Generally speaking, you’ll need a credit score of at least 620 or higher to get approved for a loan, though many online lenders accept scores under this threshold.
Your credit score will also determine your interest rate if you are approved. The higher your credit score, the lower your interest rate will typically be, which will make your loan more affordable.
If your credit score is low, consider taking some time to improve your score to boost your odds of loan approval at a more affordable rate.
In addition to the interest rate, your loan may also come with several fees that the lender may charge. These can include administration fees, early repayment penalty fees, and others. Look at the fine print to find out exactly what additional fees you may be paying when you take out an online loan.
Before applying with an online lender, get pre-qualified. Most online lenders will offer ways to get pre-qualified instantly or within a few minutes. To get pre-qualified for a loan, you’ll be asked to provide information about the following:
Prequalifying for a loan will help you compare lenders without undergoing a hard credit check, which can negatively affect your credit. Once you pass the pre-qualification phase, you can proceed to the loan application.
If you need cash yesterday and don’t want to jump through hoops to get approved for a much-needed loan, an online loan may be the answer for you. With the right online lender, you can get access to the funds you need to cover whatever expense you may have. Just be sure to take a few minutes to do some comparison shopping to pick the best online lender and loan for you.
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Lisa has been working as a personal finance writer for more than a decade, creating unique content that helps to educate Canadian consumers in the realms of real estate, mortgages, investing and financial health. For years, she held her real estate license in Toronto, Ontario before giving it up to pursue writing within this realm and related niches. Lisa is very serious about smart money management and helping others do the same.
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