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For this post, we’ve teamed up with our partners at Fairstone.

Most of us will need a personal loan at some point in our life. Whether you’re borrowing money to buy a car, cover educational expenses, or even to manage an emergency expense, borrowing is very common – but, that doesn’t mean it’s something you should do without careful consideration.  

A loan is a financial agreement that allows you to borrow the money you need, but at what cost? We’ve teamed up with our partners at Fairstone to answer the most commonly asked questions about personal loans, so when you borrow money you’re comfortable understanding the details of your loan agreement.

How much am I going to pay?  

How much you’ll have to pay on your loan depends on a few factors, including:

  • Loan amount – how much money you borrow
  • Interest rate – the percentage of the loan amount you’ll be charged (typically on an annual basis)
  • Loan term – how long you’ll take to pay back your loan

Here’s how it works: interest is calculated based on your balance (how much money you owe). The more you owe, the higher your interest charges will be. The longer you take to pay off your loan, the higher your balance will continue to be and the more interest you’ll pay over time. 

How can I reduce interest charges?

You can control how much interest you pay by:

  1. Staying on top of loan payments – missing a payment means your loan balance doesn’t decrease; in fact, it will probably increase as the interest you were supposed to pay on your last payment gets added to your balance owing. This can put you behind on your payment schedule and cause interest charges to grow. 
  1. Making extra payments – Any extra amount you pay on top of your scheduled payments (even $5) goes straight toward the principal of your loan. By making extra payments, you’ll reduce your loan balance faster, and interest will be calculated on the new lower balance – meaning you’ll also reduce interest charges. 
  1. Paying off your loan early – If you’re able to, paying off your loan before the loan term is up will immediately reduce how much interest you’ll pay. Interest is calculated based on how much you owe, so if you don’t owe anything you won’t have any interest to pay. A word of caution – some loans (for example, secured loans or home equity loans) may have pre-payment penalties, generally equal to a few months’ interest charges. You’ll want to ask your lender about any pre-payment penalties and weigh the cost of paying off your loan early vs. paying within your loan term.

Is there anything else I should know?

There are a few key pieces of information you’ll want from your lender before you sign your loan agreement, such as:

  • Can you get a lower rate as a homeowner? Some lenders, like Fairstone, offer lower rates and greater borrowing power for homeowners who choose to secure their loans with home equity.
  • Are there any fees for borrowing? If you do choose a home equity loan, your lender may require that your property value is assessed, which may increase your costs of borrowing.
  • Is loan insurance a good option? Your lender may provide creditor insurance options like creditor job loss insurance, life insurance or disability insurance. These products can help cover your loan payments in case of situations like an unexpected job loss, injury or death, keeping your family and/or your estate protected.

While most people focus on how much they’ll pay on a personal loan, there are many details that go into ensuring the loan is right for you. Most of all, we recommend finding a reliable lender who you can trust to take stock of your financial situation and find a loan that meets your needs and budget. 

If you’re looking for more information on personal loans, or want to compare types of loans, visit You can also request a no-obligation loan quote, to find out how much money you could qualify for and what your payments might be without impacting your credit score.

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Fairstone Financial is a leading alternative lender in Canada, they have been helping Canadians since 1923. Their mission is to provide Canadians, with fair to good credit, with an affordable alternative to payday loans.

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