When you need an affordable loan, you just have to look online. Plenty of financial services are available online, including personal loans. This is particularly convenient for those consumers with busy lives and schedules.
Long gone are the days of having to apply for a loan at the local branch of your bank and the multiple meetings that followed. If you’re in debt or looking to apply for a loan, there are countless online lenders available to help you get the financing you need.
How To Get A Loan Online With Affordable Monthly Payments?
In order to get an online loan with affordable monthly payments, you must decide how much money you’re borrowing, then weigh that amount against your income and current debts. You can also use those numbers to figure out your debt-to-income ratio.
How To Calculate Your Loan Affordability
Your debt-to-income (DTI) ratio is the total amount of monthly debt you have, divided by your gross monthly income. It’s one of the main ways lenders evaluate creditworthiness and a good formula to use when you’re assessing the affordability of a loan.
While every lender has different requirements here, most prefer to see a maximum DTI of around 30% – 40%, since it means you’ve been responsible enough with your debts.
Loan Affordability Example
Given that the maximum DTI most lenders require is 30% – 40% and assuming you have a monthly gross income of $4,000, the maximum debt you can have is $1,200 (30% of $4,000 = $1,200) to $1,600 (40% of $4,000 = $1,600).
As such, if you currently have $1,000 in monthly debt, you’d have $200 – $600 dollars left of your income to spend on another loan.
Other Factors To Consider When Calculating Your Loan Affordability
- Your employment status
- What you can afford if you were to lose your job or be unable to work
- Financial emergencies or unexpected costs
- Bank account balances
- Your other necessary regular expenses and overall budget
How To Apply For A Loan Online With Affordable Payments?
Depending on which lender you choose, applying for a loan online can be relatively easy. It shouldn’t take more than 10 – 15 minutes to fill out and send in your application Here are the basic steps to get a loan online with affordable monthly payments:
1. Prequalify
Shop around with multiple online lenders so you can compare interest rates and loan terms. Don’t forget to research each lender properly before you apply, just to make sure they’re a legitimate business with affordable products and good customer reviews.
If it’s an option, you should also go through their pre-qualification process. Generally, this involves a soft credit check, which won’t affect your credit score. Keep in mind that the deals you see when pre-qualifying may not be the actual ones you receive after applying. Pre-qualifying only shows you the types of loans you can get.
2. Choose Your Lender And Complete An Application
Once you’ve found a trustworthy and affordable lender, go to their website and start your loan application. During this process, you’ll have to choose your desired loan amount, then enter a variety of personal and financial information.
Documents Required
To verify your information, most lenders will also ask for proof of identity, residency, income and bank account via these documents:
- 1 or more pieces of government photo ID (driver’s license, passport, etc.)
- 1 or more recent income (pay stubs, etc.) and bank statements
- An official document that contains your address (utility bill, etc.)
- A pre-authorized debit form or VOID cheque (for loan deposit and payments)
Make sure not to leave out any information or documents to avoid processing delays.
3. Submit Your Application
Depending on how and when you submit your application, you could wait as little as several minutes or as long as a couple of days to hear back from your lender.
4. Get Funded
If you qualify, the lender will contact you to confirm your loan and give you any related documents, including the conditions of your loan. If everything looks good, all you have to do is sign the loan agreement and wait for the funds to arrive.
Most lenders send loans by direct deposit, but other payment methods such as e-Transfer may be possible. Like the approval process, it could take a few minutes, hours or days to get your loan, depending on where and when you apply, as well as your loan amount.
How To Lower Your Monthly Loan Payments?
If you negotiate with your lender and make new arrangements, there are multiple ways to obtain lower monthly loan payments, including but not limited to:
- Consolidate Debt – First, pay off as many outstanding debts as you can. This should help raise your credit score and reduce your DTI, making it easier to qualify for lower monthly payments and interest rates when you apply for a loan.
- Extend Your Loan Term – If you agree to extend your loan term, some lenders will offer you lower monthly payments and interest rates. Just keep in mind that longer terms may cause you to pay more interest for your loan overall.
- Get A Lower Interest Rate – You can qualify for better rates by having a steady income, low DTI, and high credit score when you apply. If you’ve already got a loan, try refinancing it when interest rates drop or once your credit has improved.
How To Calculate Your Online Monthly Loan Payments?
Since the interest is the largest cost of any loan, it’s important to find the lowest rate possible before you apply. However, factors such as your loan amount, loan term and fees can also impact the loan payments. You can use this online loan calculator to better understand how much your loan payments will be.
What Can Affect Your Online Monthly Payments?
There are a number of factors that can affect your online monthly payments, including the following:
Lender
The lender you apply with can impact your monthly loan payments as their loan requirements and loan offers will vary. As such, before you apply for any financial service online it’s essential to do your research. While some lenders will put a heavy emphasis on your credit score, others may put more emphasis on your overall financial health. Be sure to check out the lender’s minimum requirements to find a lender that you have the best chance of qualifying for.
Credit
One of, if not the most important things to take into account is how your credit history can affect your ability to afford your monthly loan payments. Your credit score can greatly affect the interest rate and loan term you’re approved for, both of which affect your monthly loan payments.
- Bad Credit Scores – Bad credit can decrease your approval chances and make you seem like a risker borrower. The riskier your lender considers you, the higher your interest rate will be, costing you more over time.
- Good Credit Scores – Good credit will increase your approval chances and give your lender more faith in your ability to make payments on time. As such, lenders may offer you a lower interest rate and longer terms, which can help lower your monthly payments.
Guarantor
If you have bad credit or poor finances, a guarantor or cosigner can not only help you qualify for an online loan, but they can help you secure lower interest rates and better loan terms. Applying for this type of loan involves finding a guarantor with good credit and finances to cosign your application. A guarantor reduces the lender’s risk by taking responsibility for the loan in the event you’re unable to make your loan payments.
Types Of Loans You Can Get Online
There are many different types and sizes of loans for Canadian credit users. Before you apply to any online loan service, it’s best to be prepared and know exactly what kind of loan is required for your particular financial situation. Here are just a few loan types that you can find online:
- Conventional, collateral, and high-ratio mortgages
- Second mortgages (home equity loans and HELOCs)
- Personal loans
- Short-term loans
- Car or other vehicle loans (boat loans, truck loans, tractor loans, etc.)
- Vehicle title loans
Online Loan Scams To Watch Out For
There are a few telltale signs that can help you identify a loan scam, such as:
The Lender Asks For An Advanced Payment
One of the most common scams is when the “lender” asks for a deposit before approving your loan. They may call it “loan insurance” and claim that it’s a standard policy because they’re supposedly taking a risk by lending to you. While that is true in a sense, no legitimate lender in Canada will ever ask for payment of any kind before your loan has been deposited into your bank account. In fact, it is illegal to do so.
The Lender Charges Too Much Interest
In reality, the only thing your lender should charge for their services is an interest rate (cost of borrowing) and administrative fees. In Canada, the criminal rate of interest is 60%. For payday loans, every province has a specific limit for how much a lender is legally allowed to charge.
The Lender Doesn’t Have A Solid Reputation
All legal lenders must be licensed by the federal and provincial governments. They should also have a reputation that stems from years of good treatment toward their clients. Make sure to look up your lender in the Better Business Bureau database and check to see that they have many customer reviews. If they don’t have any real presence or their reviews are clearly fake, avoid them.
The Lender Doesn’t Provide The Right Information
Whatever type of loan you apply for, a real lender is supposed to have the proper details on hand, especially when it concerns the general costs. Your own lender should outline every single detail about your payment amounts, payment dates, interest rate, and all associated fees. If they refuse to tell you this or they’re avoiding your other questions, something is definitely not right.
What To Do If You Fall Victim To A Loan Scam
If you think you’ve been scammed, take immediate action. The longer you wait, the more damage the fake lender could do to your finances. Don’t worry, there are a few preventative measures you can take, such as:
- Review all your credit and banking accounts for suspicious activity
- Have your credit cards cancelled by your credit card companies
- Contact your bank, and ask them to freeze your accounts temporarily
- Request that your bank account numbers and other information be changed
- Contact Service Canada and request a change of social insurance number (if necessary)
- Contact the authorities. Every police department should have a branch dedicated to fraud, identity theft, and other financial crimes
Loan FAQs
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Need An Online Loan? Apply With Loans Canada!
If you’ve been looking for a legitimate source of online loans, look no further. Loans Canada can match you with the best lender for your needs, get started by filling out an application today.
