Getting Smarter Loans in Canada
When it comes to loans, everyone wants the best loans out there. Low-interest rates, budget appropriateness, and reasonable payments are what most are keen on, otherwise known as smarter loans. Generally, everyone is looking for better information, better decisions and smarter loans related to their personal finances. Smarter loans are obviously advantageous in the short term, but they can also benefit you in the long term because you’re working on your spending habits which contributes to a brighter financial future.
Smarter Loans Mean Smarter Financial Habits
It’s easy to get caught up in personal finances and debt because our society promotes the consumption of materialistic goods. Want a new pair of designer shoes? Put it on your credit card. Want a big house? Get that loan you can’t afford.
While having all those materialistic things can be great, you have to make sure that you’re using your money wisely and can afford your debt comfortably. Part of getting smarter loans is having smarter financial habits. This means that you need to pick the right loans for your unique personal needs. Understanding your financial needs, and fulfilling them in the best way possible, is one of the hardest things to do in personal finance, but it is absolutely necessary and worthwhile. The smarter you are with your spending habits, the better your loans will work for you thereby giving you access to smarter loans.
Check out this infographic to learn about the true cost of borrowing.
How to Get Approved for the Loan You Need
If you’re a Canadian consumer who’s looking to get approved for a smarter loan, one that will not only help you cover the cost of whatever expense you’re currently dealing with, but will also not hurt your finances, here are our top tips.
Determine What Loan You Want
There are a variety of loan types out there, each of them has corresponding pros and cons. The very first step you should take is determining what loan type you want, based on your financial situation. Remember that everyone’s situation is unique. Just because one loan works for someone else, does not mean it will work for you. Examples of loan types are personal loans, short-term loans, vehicle loans, and mortgages.
Here’s how you can find the best personal loan for your financial needs.
Calculate What You Can Afford
You might have the ability to get approved for a large loan, but at this point, you should calculate how much money you want and how much you can afford. Sometimes these figures don’t align which is why you should consider both scenarios. As appealing as something bigger and better sounds, it likely isn’t worth the stress and penalties resulting from not being able to afford your debt.
Looking for an online loan with affordable monthly payments? Then read this.
Pick a Lender
Lenders are like any other industry, each business has their own unique offers and benefits. Because loans that you take out are a significant decision, be sure to do your part by researching lenders before applying for loans. You want to make sure that the lender can offer you what you need based on your financial state.
Understand Factors Lenders Consider
Lenders look at a variety of factors in each loan applicant before they can approve you. Things that are often considered by lenders are regular income and expenses, employment status, bank account balances, credit health, other debts, collateral, and co-signers.
It’s common knowledge that lenders look at your credit score and report before approving loans. Credit scores are meant to quantify how you’ve handled your finances in the past which is why they are so popular among creditors. Generally, ‘good credit’ is anything above 650, anything below this is considered ‘bad credit’. In addition to your actual score, lenders look at your payment history, credit history, and credit variety.
Before applying for a loan, take a look at your credit report as you are entitled to a free copy from Equifax and TransUnion every 12 months. There are various things you can do to improve your credit score before you apply which will better your chances of getting approved. Things you can do to better your credit are:
- Dispute errors with the credit bureau, Equifax and TransUnion
- Pay off any outstanding debt that you can
- Diversify the credit types you have
- Make payments on time and in full
- Reduce your credit utilization ratio (your balance compared to your credit limit)
Smarter Lenders, Smarter Loans
Now that you understand how to increase your chances of getting approved for a loan you want, let’s look at how to choose the smartest lender for your purposes.
How to Compare Lenders
One of the best ways to get a great deal on your loan is to compare lender offers. Taking the first offer you get is easy, but you definitely won’t get the best deal out there if you don’t do your research and compare.
The first step is to reach out to a variety of lenders and obtain offers from them, this is how you’ll find smarter loans. You can consider hiring a broker to do all the leg work for you, but remember that they will charge a fee. Next, you’ll need to compare all the offers you get by considering the interest rate, loan term, applicable fees, repayment schedule, terms and conditions, and total cost of the loan. At this point, you really want to consider your unique needs and financial goals when determining which loan is the best.
Consider Existing Relationships
Another thing to consider is any existing relationships you have lenders, do you like working with them? Do you trust them? Having a positive relationship with your lender matters because you don’t want to have to deal with someone you don’t like for years.
This is how lenders set their interest rates.
Decided Based on Your Needs
Finally, once you’ve narrowed down your options, it’s time to negotiate for an even better loan. Not all lenders have room for negotiations, unfortunately, their first offer is sometimes the best they can do. If this is the case, ask your lender if you can make a deal with them by bettering your credit score, paying down other debt, getting a co-signer, applying for a smaller loan, applying for a different type of loan or providing collateral.
Payday Loans vs. Installment Loans
What About Bad Credit Loans?
If you have bad credit, it can be very difficult to get approved for a loan, as you may already know. Fortunately, having bad credit doesn’t mean that you’ll never get approved for the loan you need. In fact, there are lenders out there that specialize in working with consumers who have bad credit. That being said, you should still take the time to better your credit score where you can as opposed to letting it get worse.
To know what bad credit lenders look at when assessing loan eligibility, click here.
Generally speaking, a ‘bad credit loan’ is for an individual with a credit score of 600 or lower. These loans can help you improve your credit and approval is usually pretty quick which is advantageous, thus making them the smarter choice. Although, on the downside, these loans usually have higher interest rates because you’re deemed to be a high-risk loan applicant.
It is great that individuals with bad credit have an opportunity to get a loan and turn their finances around, but be cautious. It can be easy to fall into a cycle of taking out money to pay off other debt. Doing this will only cause more problems, you still need to make sure you can afford the loan you want and make a plan to get your finances back on track.
Take a look at this infographic for even more information about credit scores.
How Smarter Loans Can Help You
Getting a smarter loan will help you get the financing you need but it will also help you with various other things. Smarter loans will help you improve or rebuild your credit, reduce dependency on high-interest debt (such as credit cards and payday loans) and save you money in the long run because of an affordable interest rate.
Better Information, Better Decisions, Smarter Loans
In your loan selection process, gathering as much information as you can about lenders and your own personal finances will help you make better decisions and get smarter loans. This way you can make loans work for you, not the other way around.
If you need assistance finding the most ideal loan with the best lender for your unique needs, Loans Canada can help!