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Relying on loans to help cover the cost of unexpected expenses and large purchases is a part of life for most Canadians, especially those living in large metropolitan areas like Kitchener. Taking on a loan for any reason is an important financial decision, this is why we’ve compiled all the information you need to make the best and most informed decision possible and choose the right loan for your needs. Keep reading for everything you need to know about loans in Kitchener Ontario.
Does applying for a loan affect your credit score? Find out here.
Where to Find The Right Loan For Your Needs?
Simply put, a loan is a certain amount of money that you can borrow by applying with various financial institutions in Kitchener, better known as lenders.
If you’re prepared for the application process and are qualified to handle the responsibility of said money, the loan should be transferred into your bank account soon after. While direct deposit is standard practice, some institutions offer several payment options, such as cheque and e-Transfer.
Prior to being approved, you and your lender will formulate a plan that splits the loan funds into equal segments that you can repay over time. Each of these installments will include an interest rate, which is what your lender charges as their cost of borrowing.
Most lenders can adjust your repayment plan to allow for:
- Monthly payments (12 a year)
- Semi-monthly payments (24 a year)
- Weekly payments (52 a year)
- Bi-weekly payments (26 a year)
Although some lenders will offer more restrictive plans, there are those that will permit you to make larger or more frequent payments without charge.
The type of loan you apply for (there are many types) and how much money you’re approved for, will affect how long your repayment schedule.. As for the lender, you will typically have two choices:
The vast majority of Kitchener residents will apply with their local bank or credit union, otherwise known as a prime lender. Here, having positive financial strengths such as a decent income and good credit will help you secure a larger sum of money, a more affordable interest rate, and more flexible repayment schedule.
If you have a lower income and/or worse credit, it may be easier to get approved by a private or alternative institution. Because of the greater risk they are taking by accepting clients with lesser financial strengths, alternative lenders will usually offer less money, higher rates, and repayment plans with stricter conditions.
How is Loan Approval Achieved?
While different lenders do present different standards for which clients they can and cannot accept, getting approved for a favorable loan is all about how responsible you will be with the money you’re potentially borrowing. As long as you can prove that you’ll make all your loan payments as scheduled, including interest and fees, you shouldn’t have much trouble getting your application approved.
That said, it’s important to keep in mind that good financial health is also key when it comes to how much money you’ll be approved for, how adjustable your repayment plan is, and how affordable your interest rate will be. The less risk you present for each of these factors, the more positive the results will be when you apply for a loan in Kitchener.
No matter what type of lender you apply with, achieving favorable loan approval will be easier if you take the following steps before and when you apply:
- Find a good source of employment and keep at it for at least a few months to show that you will have a steady income throughout your repayment plan.
- Pay off as much of your outstanding debt as possible and be sure to have enough savings leftover to cover all costs associated with the loan.
- Request a copy of your credit report from Canada’s two credit bureaus (TransUnion and Equifax), then review both versions for errors, signs of fraud and identity theft (file a dispute if you discover any).
- Request your credit score (for an extra fee) which, for the best outcome, should be within the ‘good range’ of 660 – 900.
- Fill out your application honestly and avoid applying for a loan amount that clearly overshadows your monthly income/bank account balance.
How does a secured loan work? Check out this article to learn more.
Applying for a Secured Loan
If you don’t currently have a great income or healthy credit, or if you would simply like better odds at obtaining a large loan with a reasonable rate, another tactic you can try is to offer your lender some form of security. Traditionally speaking, this is known as securing your loan and can be done in two ways:
- If you know someone trustworthy and financially stable that will agree to take over your installments in the event that you cannot afford them, they may be able to cosign your application. Be careful, as becoming responsible for the loan means that they will acquire your debt, which could endanger their finances.
- If you don’t have a cosigner but do have an asset, such as a house, vehicle, or other valuable property that you fully own, you can offer it up as collateral. You must also be cautious here, as this would give the lender temporary ownership over the asset and the right to sell it if you default on your loan.
Essentially, either of these forms of security will act as an insurance policy for the lender, reducing the risk they would be taking by allowing you to borrow from them. If you are planning to go this route, just be sure that you and/or your cosigner are comfortable taking some risks of your own. Although a normal unsecured loan may be more expensive and have somewhat less appealing conditions, it may be safer than endangering your cosigner or assets.
What is a Loan Scam and How Can it Be Avoided?
If you’re about to apply for a loan in Kitchener, it’s also extremely important to compare numerous lenders in your area. Not only will this help you find the best rates and conditions available, it will also make you good at spotting loan scams, which can be particularly hazardous to your finances when you don’t know the warning signs.
No matter how official a lender’s website or business may look, always avoid them and report their suspicious activity to the authorities when they:
- Don’t have a business address
- Don’t display all their loan costs upfront through advertising and contracts
- Have bad or obviously fake customer reviews on social media.
- Aren’t listed with the Better Business Bureau
- Charge unreasonably high interest rates and fees
- Demand “loan insurance” or any other up-front payment before your money is deposited
- Offer an approval guarantee rate of 100% in exchange for a fee
- Use aggressive or disrespectful language to get you to apply or pay
If you have recently been scammed when applying for a loan, have discovered suspicious/fraudulent activity on either your bank statements or credit report, contact the Canadian Anti-Fraud Centre immediately.
Afterward, be sure to inform your bank so that they can take the proper measures to modify your accounts. Once your finances are protected, speak to both credit bureaus and allow them to put a fraud alert on your report, as well as deal with any fraudulent accounts that have been opened in your name.
For more information about dealing with loan scams in Canada, check out this article.
Applying for a Loan? Talk to the Experts First!
If you’re in need of the right loan in Kitchener, you’ve come to the right place! Loans Canada is committed to helping you find the best lenders, credit products, and rates in your area.