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As one of Ontario’s most populated cities, Brampton is home to plenty of credit users. If you’re one of those credit users, that means you can potentially access a wide variety of credit products, including loans, which can help you in all kinds of situations.
If you’re interested in applying for a loan in Brampton, but would like to know a little bit more about what steps the process involves first, keep reading, we have all the information you need.
For information about applying for a loan in Ontario, check out this article.
Where to Look For a Loan
From a general standpoint, a loan is a lump sum of cash that you can apply for through various lenders in Brampton. If you qualify you’ll typically receive your money via direct deposit, then repay over time using divided installments. In addition, those same lenders are sure to offer a variety of loan types, any of which can serve a different purpose.
For example, a mortgage is meant to help you purchase an otherwise unaffordable home over many years, while a simple personal loan is money in your bank account that you can use to pay for whatever you need. These loans can also range in size, as well as how long their repayment plans can last.
Common loan application mistakes everyone should avoid, click here.
Choosing Your Lender
In Brampton, you will also have a number of lending sources to choose from. For credit users with better security, higher incomes and good credit scores, the place to go would be a local prime lender, like a bank or credit union. At one of these financial institutions, approval requirements can be more strict, while loans are probably going to be larger and have more reasonable interest rates.
Anyone who has trouble qualifying with a prime lender due to a lower income, history of unpaid debts, or less-than-perfect credit can instead apply with a private or alternative source. Although loan approval is easier to secure here, loans are often smaller and come with slightly higher interest rates because of the heightened risk they are taking with their clients.
In the end, the lender you choose should depend on what your current financial situation is like, as well as what you can comfortably afford in terms of your loan repayment plan.
Keeping an Eye Out For Loan Scams
When selecting a lender, it’s extremely important to be on the lookout for any warning signs that could indicate a loan scam, which may lead to your money, banking information, and even your identity being stolen (for more information about loan scams affecting Canadians, click here).
Don’t worry, because while fraudsters and identity thieves have come up with some clever ways to steal from you, there are a number of red flags that you can use to avoid them. These warning signs may include, but aren’t limited to:
- A lack of business license and/or address – While many legitimate lenders are now based online or offer online services, they should still display valid business credentials and have an address that you can visit or report to the police if necessary.
- An offer of “guaranteed” approval – Many subprime lenders will approve you if you have a low income, bad credit, or other problems with your financial profile. However, no real lender will ever 100% guarantee to approve your loan application despite your financial issues, as this claim is illegal.
- A demand for payment in advance – A legitimate lender will never ask you for it or any form of payment before your money has been deposited.
If you would like to learn more warning signs or if you’ve recently fallen victim to a scam, fraud, or identity theft, be sure to contact the Brampton authorities, as well as the Canadian Anti-Fraud Centre.
How to Get Approved For a Loan in Brampton Ontario
As previously mentioned, different lenders will come with different standards for which clients they will approve, as well as how much money they can lend out at any one time. Nonetheless, when you apply, the first thing that all lenders need to confirm is your ability to afford the costs associated with the loan.
To strengthen your approval chances, be sure to take the following steps:
- Create a budget, then factor your payments, rate, and loan fees into it
- Avoid requesting a loan amount that is clearly out of your budget
- Earn and save as much income as possible (make sure to have a backup fund)
- Pay off any outstanding debts you hold with other parties
- Check your credit report yearly for errors, fraud, and identity theft
- If possible, keep your credit score within the good range (660 – 900)
- Find a cosigner (optional)
- Offer collateral (optional)
Everyone should check their credit report for these 4 common errors.
Using Loan Security
While it’s not always necessary, some lenders require loan security in the form of an asset. This lessens the risk they are taking on.
This is known as “securing” your loan and can be more cost effective than the average unsecured loan, which is more expensive due to its higher interest rate (more risk means more money is charged). In fact, the better your security is, the better your approval chances, interest rate, and loan amount will be.
Traditionally, you can offer loan security offered in two ways:
- By finding a cosigner – If your financial health will not allow you to qualify or you want to increase your chances of approval, asking a stronger credit user to cosign your loan can be a huge help. Just be careful, as they will become responsible for your payments if you cannot afford them.
- By offering collateral – If you have no cosigner, you can also offer up an asset, like your house or vehicle as collateral. Your lender would then hold temporary ownership over the asset until your payments are complete. You should also be cautious here, as missing too many payments could result in your assets being seized as compensation.
How to Find an Affordable Interest Rate
Remember, before you apply for a loan in Brampton, you must be aware of all the costs that may be involved, then factor those costs into a proper budget so you’re certain you can afford them. After all, defaulting on your payments, for whatever reason, can result in penalties, added interest, and even a drop in your credit score.
Interest Rates Defined
Essentially, interest is what lenders charge in exchange for the money you’re borrowing. Your rate can vary depending on where you apply, how qualified you are, how much you’re requesting, and how valuable your security is, if any.
Prime and subprime lenders also offer different rates, due to the amount of risk they may or may not be taking on you as a potential client.
Fixed vs. Variable Rates
Depending on your lender’s policies and what kind of loan you apply for, you may also be able to choose between a fixed or variable interest rate. Choose your rate type wisely, as they can drastically affect how much your loan costs over time.
- A fixed rate will not change over the course of your repayment plan, but it may be somewhat higher than a variable rate. Having said that, a fixed rate is much easier to calculate and budget for down the line.
- A variable rate, on the other hand, is going to fluctuate according to the Bank of Canada’s prime rate, which is why it can end up lower and more affordable than a fixed rate. The only problem is that when the prime rate goes up, your variable rate can become too expensive for your comfort zone.
Earning The Lowest Rate Possible
Suffice to say, whether you choose a fixed or variable interest rate, much of what you end up paying will hinge on how qualified you are as a loan candidate.
For instance, having a decent income, little or no unpaid debt, and a credit score within the 660 – 900 range usually means you have a better chance of making payments on schedule. As a result, you can potentially access the lowest rates a lender will offer.
However, the opposite will occur if you have a bad credit score of 300 – 600, partial or no steady employment, a large amount of outstanding debt, or if you have recently gone through a financial delinquency, such as a consumer proposal or bankruptcy.
Since a lower interest rate can save you hundreds, even thousands of dollars over the life of your loan, it’s once again important to strengthen your financial health and credit as much as you can, prior to applying.
Applying for a Loan in Brampton?
Most cities in Ontario, including Brampton, can be expensive to live in, which is why it’s a good idea to have several payment methods at your disposal, such as credit cards, lines of credit and, of course, loans. If you’re interested in applying for a loan or would like more information about the process, don’t hesitate to contact us at Loans Canada!