To help you navigate post-CERB Canada, here is everything you need to know about what government help is available to you in 2022.
Whether you’re a new or veteran credit user, chances are you’ll need several ways to pay your expenses throughout the years. For instance, cash, savings, and credit cards can be great for covering your basic expenses, such as groceries, gifts, and other consumer goods. What most customers want is a lender that will lend for all.
Then again, your larger expenses may need a bit more coverage, in which case a loan might be a more effective tool. All this said, there are actually several types of loans available in Canada, so it can be tough to figure out which is best for your situation. This is where Loans Canada can help. Our lender directory provides consumers with the ability to compare lenders, look for loan options, and read reviews making lending easy for all. With Loans Canada you can find smarter loans and get connected with the best loan rate. Our lenders lend for all Canadians.
What Are My Loan Options In Canada?
Before you apply, keep in mind that any loan, no matter the size or type, can have a negative impact on your finances if used irresponsibly. Be sure to compare and research all the following loan options properly so you don’t end up with a debt that you cannot manage.
While every lender has a different way of doing business, most loans will be transferred directly to your bank account by direct deposit. During the process, you’ll also be given a predetermined plan that allows you to repay your loan through divided installments.
Here are a few of the more common loan types available in Canada:
Unsecured & Secured Personal Loans
A personal loan is a lump sum of money that you can borrow from almost any bank or alternative lender in the country. Though not every lender offers both options, there are two types of personal loans that you can apply for:
- Unsecured personal loans are more common because the requirements to qualify are somewhat easier than with other loans. Here, no collateral is needed for approval. Instead, your loan conditions will vary based on your income, credit, and overall ability to pay your debts.
- Secured personal loans are harder to qualify for because you need to provide collateral, such as your vehicle or another asset you own. Although your lender can take your asset if you miss too many payments, you may be eligible for a larger loan with a lower interest rate if your collateral is valuable enough.
Check out the difference between a personal and payday loan.
Payday loans in Canada are very easy to get approved for and come in small amounts of $100-$1,500. To qualify, you only need to be a Canadian resident with a job, bank account, minimum monthly income of around $1,000-$2,000, and government I.D. that proves you’re the age of majority in your province/territory.
Watch out, because payday loan terms are only 14-days long. Once it’s due, the entire loan sum, plus interest and fees will be automatically debited from your account. They also have much higher interest rates than most other credit products. They are only good for small financial emergencies and borrowers who can’t qualify elsewhere.
A car loan helps you finance a vehicle over time. While some lenders will simply offer you a lump sum, many dealerships can offer you in-house financing plans.
Unsecured Personal Line Of Credit
Instead of liquid money, your lender will offer you a revolving credit limit to withdraw from when necessary and repay through monthly balances. Just like a credit card, you will have the option of making minimum, partial, and multiple payments each month. In fact, most lenders will provide you with a special debit card to use to withdraw from your line of credit.
HELOC Or Home Equity Loan
When you have at least 20% home equity, many mortgage lenders will allow you to dip into it using several credit products. Two of the most popular choices are:
- A home equity line of credit (HELOC) is another type of revolving credit limit and can help you to access up to 65% of your equity, if you apply through a bank or other federal lending institution. That limit can increase to 80% if you combine it with your primary mortgage (minus the balance remaining).
- A home equity loan is often called a “second” mortgage since it resembles the traditional mortgage process. Like a HELOC, this loan can also equal up to 80% of your available equity but will be deposited as cash directly into your bank account. Once again, you’ll have set loan installments to cover until your repayment term ends.
Rather than offering you cash, a mortgage lender will buy a home or other real estate property for you. You would then repay them over one or more decades worth of installments at a fixed or variable interest rate. The more of your property you buy and the more value it accumulates, the more equity you’ll have in it.
A business loan can help you finance almost any part of your enterprise but is harder to qualify for than a simple personal loan. Essentially, you’ll have to show your lender that your operation has a good chance of succeeding in the future. If all goes well, you should receive the money in your business bank account. You can then use it to cover any necessary expenses, such as consolidating debts and hiring new employees.
How To Choose The Right Loan For Your Needs
Now that you know about the types of lending options available to all Canadians, it’s time to figure out which one will benefit your situation the most. After all, taking on debt is a serious decision, so it’s important to do all the research possible and be certain that you can afford all the associated costs.
Ask yourself these questions before you apply:
- Is a loan the best option for this expense? Loans can range in all sizes and purposes. However, due to the higher costs and level of responsibility that may be required, a loan might not be the best option for buying basic consumer items that could be financed with simpler methods.
- Are you looking to purchase something specific? As mentioned, not all loans are liquid cash that can or should be used for just anything. For instance, a car loan is obviously meant to make a vehicle more affordable, not for buying consumer goods. On the other hand, a personal loan or home equity loan might be better for large purchases, such as new appliances or household repairs.
- Is taking on debt absolutely necessary right now? Although loans can help you in many situations, they aren’t practical for everyone and can cause financial issues when handled irresponsibly. If there is a chance you won’t be able to afford your payments down the line, it may be safer to avoid taking on any debt and look for another alternative.
You should also consider the following factors:
- Your income – Think about how much loan debt you can comfortably afford and what you would do if you lost your job. Remember, serious problems can arise if your income can’t support your payments. Additionally, a higher income means you’re a less risky client, so lenders will be more likely to approve you for a larger loan with more favourable conditions.
- Interest rate – Every loan comes with an interest rate, which lenders charge as their fee for lending. Your rate can definitely add to the overall cost of your loan, so it must be calculated properly before you apply. You may be able to choose from a variable rate that fluctuates according to Canada’s prime rate or a fixed rate that won’t change during your payment term.
- Loan fees – Prior to choosing your lender, make sure to ask them about the fees that they charge, as they can also drive up the final price of your loan. These fees could include but aren’t limited to loan origination, cheque cashing, or other administrative procedures.
- Requirements – When you apply, your lender will inspect things like your income, credit score, and current debts to determine if you can handle your upcoming payments. The stronger your finances are, the easier it will be to get approved for a large loan with a favourable repayment plan and a low-interest rate.
- Secured Vs. Unsecured – As mentioned, you’ll need collateral to apply for a secured loan, which will usually have better conditions and a lower rate than an unsecured loan because you’re providing the lender with security. However, this can be very risky. For example, you could lose your home to a foreclose if you default on too many mortgage payments or have your vehicle repossessed for missing too many car payments.
- Cosigners – If you have bad credit or a low income, some lenders will allow a stronger borrower to cosign your loan application. Similar to loan security, this gives your lender some assurance if you default.
How To Select The Best Lender
In Canada, there are hundreds of different lenders that offer various types of loan products, so it can be tough to know where to start. Some lenders charge better rates, others have more effective products. All this said the key is to do a lot of advanced research and don’t jump to any quick decisions.
Don’t forget to take these measures during your search for the right lender:
- Get a referral from someone you trust, a financial advisor, or a credit counsellor
- Compare and contrast every loan product they offer
- Check out their customer reviews, privacy policies, and company history
- Look up their profile in the Better Business Bureau database
- Make sure they report to a major credit bureau (Equifax/TransUnion)
- Confirm what personal or financial documents they’ll request when you apply
In the end, the choice is up to you. If you’re having trouble qualifying because of bad credit or other debt-related problems, there are plenty of alternative lenders who have easier requirements and can approve you for smaller, higher-risk loan products.
If you feel that applying with a lesser-known lender is unsafe, you may want to ask around at your local bank instead.
Loan Scam Red Flags
Unfortunately, there are many predatory lenders and scam artists out there seeking to overcharge you for unhelpful loan products or worse, steal your money, banking information, and identity.
Be sure to steer clear of any “lender” if they:
- Charge higher interest rates than the provincial/federal government allow
- Ask for “loan insurance” or another form of payment upfront
- Refuse to show you a valid business license or other credentials
- Refuse to answer your questions or speak respectfully to you
- Don’t display their rates and fees on their website and/or loan contracts
- Have negative or fake customer reviews on social media
- Aren’t listed with the BBB or don’t have a solid, long-standing reputation
- Claim to have a 100% customer approval rate or that they will “guarantee” your loan will be approved
I have bad credit, can I still get a personal loan?
Should I get a secured or unsecured loan?
Why should I use a personal loan to consolidate my debt?
Can I still get a loan if I recently declared bankruptcy?
All For One And Lend For All!
Having trouble finding a loan or line of credit that suits your exact tastes? Don’t worry, because Loans Canada can help you find it. heck out our website for more information. While not every Canadian consumer wants or needs a loan, there is a loan for every Canadian consumer in need.
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