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📅 Last Updated: February 4, 2022 ✏️ Written By Bryan Daly 🕵️ Fact-Checked by Caitlin Wood
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Ontario is the largest province in Canada with approximately 14 million Ontarians living there. It is considered an expensive province to live in due to the high cost of living, particularly in its major cities like Toronto, Brampton, Mississauga, Markham, Oshawa, Ottawa and Barrie. For a 2-bedroom apartment, rent alone can cost Ontarians $2,000 a month depending on the city they live in. Other costs like insurance, daycare, transportation and general activities can also have a big impact on cash flow for many Canadians in Ontario. If you’re struggling to cover certain costs or need extra cash to cover an expense, a personal loan can help.
What Is A Personal Loan?
A personal loan is a lump sum of money provided by a lender in Ontario. You’re free to use the loan however you like, but you’ll need to repay the amount in installments over a period of time with interest. Getting a personal loan in Ontario can be a very effective financial tool when you use it wisely. It can not only cover your costs, but every full on-time payment you make may positively affect your credit. And when you have good credit under your belt, you’ll have better chances of accessing affordable credit in Ontario. This is particularly important if you want to apply for a car loan or a mortgage in Ontario someday.
What Can A Personal Loan Be Used For In Ontario?
Personal loans come in the form of cash that is deposited directly into your bank account. As such, you could use your personal loan to pay for any expense or activity in Ontario:
- Pay For Your Utilities – Pay your cell phone bill or water heater bill using a personal loan. You can even use it to buy out of your water heater rental contract.
- Pay For A Local Trip In Ontario – While it’s not recommended that you use a loan to pay for a trip, it is an option if you know 100% that you can pay it off with ease. So whether you want to go camping at Ontario Parks, the Algonquin Provincial Park, Bruce Peninsula National Park or any of the other major parks in Ontario, a personal loan can make your trip affordable.
- Education In Ontario Is Expensive – Many students rely on OSAP in Ontario, however, not everyone qualifies. A personal loan can help cover your cost of education in Ontario.
- Cover Your Car Repairs And Maintenance Costs – In Ontario, auto insurance can cost an arm and a leg in certain cities like Toronto. Many Ontarians opt for less coverage as a result. If you have an accident and your auto insurance isn’t able to cover the entire bill, you could use a personal loan to cover the cost.
Save money with these car insurance discounts.
How Much Can You Borrow From A Lender In Ontario?
The size of the personal loan that will be available to you depends on a number of elements, including but not limited to:
- Your Income Level – One of the main factors lenders use to determine the loan amount they provide to you, is your income level. The higher your income, the more money you can qualify for as you’ll have the cash available to pay off the loan.
- Your Debt-To-Income Ratio – Even if you have a high-income level, if a significant portion is already going to other debts and bills, it can affect the amount you qualify for.
- Your Credit Score – Your credit scores tell lenders how likely you are to pay your bills on time. If you have a poor credit score, lenders may be hesitant to lend you large sums of money.
- The Security You Provide – If you provide an asset or get a cosigner, you’ll likely qualify for a larger loan as it reduces the lender’s level of risk.
What Credit Score Do You Need To Get A Personal Loan In Ontario?
Lenders in Ontario often examine your credit scores as part of their application procedure to determine your creditworthiness. If you have bad credit scores, it can be difficult to get a personal loan from a traditional bank in Ontario, however, there are alternative lenders in Ontario who look beyond your credit during their underwriting process.
Normally, a score of 650 or above signals that your credit is solid and gives you the best opportunity for approval in Ontario, as well as a favourable interest rate. Depending on your lender, a score below that level may still be acceptable. However, your interest rate might end up being higher, ultimately making the loan more expensive over time.
Documents Required To Get A Personal Loan In Ontario
Lenders in Onatrio will require a number of personal and financial information from you in order to assess you for a personal loan. Generally, you can expect to provide the following:
- Personal Information – You’ll need to provide documents to prove your identity and address, this includes a government-issued photo ID, SIN card (optional), utility bill and other personal documents.
- Financial Records – In order to evaluate your financial situation, your lender will require documents that show your income like pay stubs, a T4 slip or an NOA statement. Similarly, they may also for an employment letter to verify your employment and its stability. They may also require your bank statements to calculate your debt to income ratio. Your bank statements from previous months/years
- Bank Details – Your lender may also ask for a void cheque or direct deposit information for the loan funding and repayment.
Benefits Of A Personal Loan
- Versatile – They allow you the opportunity to pay for whatever you want, possibly larger expenses than your credit card or current income will allow.
- Lower Interest Rate -They usually come with lower interest rates than most credit cards
- Flexible Payment Options – Most personal loans are offered with different payment period options (monthly, semi-monthly, weekly, bi-weekly, etc.)
- Secured – You may have the choice of using your assets (home, car, or other property) as collateral to secure your loan, possibly earning you an even better interest rate
Drawbacks Of A Personal Loan
- Higher Requirements – Generally, there are more requirements to qualify for a personal loan than a credit card
- Impact Credit Scores – Missed payments may negatively impact your credit.
Should You Use A Credit Card Instead Of A Personal Loan In Ontario?
Depending on what your financial situation is, one form of credit will offer you better benefits than the other. In general, credit cards are better for smaller day-to-day purchases that you can afford to pay off in full within the billing cycle. On the other hand, a personal loan is better for expensive purchases that you’d like to break down in cost to make them more affordable.
Pros Of Using A Credit Card In Ontario
- Credit cards can help cover the cost of less expensive consumer goods.
- Gives you 30 days before you actually have to make a payment
- Has added benefits such as travel insurance, reward points and discounts (depending on your card type)
Cons Of Using A Credit Card In Ontario
- It can hurt your credit if you stop making full payments. While sticking to minimum payments (or just above) will help you avoid penalties, it can cause your credit utilization ratio to go up which can negatively impact your credit. It can also lead you into a never-ending cycle of debt. For every dollar that goes unpaid, you’ll be charged interest.
If you stop making payments completely, your account may be sold to a collection agency, who may take legal action and try to garnish your wages.
Frequently Asked Questions
Can I get a personal loan with bad credit in Ontario?
Yes, while it may be tough to qualify for a personal loan with a bank or credit union when you bad credit, there are many alternative lenders whose entire business model revolves around providing loans to individuals with bad or no credit. These lenders have different requirements than traditional financial institutions and approve their applicants on their overall financial health. Your level of income, your job stability and your debt level are some common factors they’ll use to determine your creditworthiness.
Should I get a payday loan instead of a personal loan?
While a payday loan has much lower requirements for approval, it is also the most expensive form of borrowing. It usually carries an APR between 400% to 600% and has an extremely short repayment period of 14-days. Many borrowers who use payday loans, often fall into the payday loan cycle and get trapped in a web of debt. On the other hand, a personal loan comes with much lower interest rates and longer repayment terms, which makes payments affordable and manageable.
How do I know I’m getting the best personal loan in Ontario?
Comparing lenders is one of the best ways to know if you’re getting a good deal for you. Interest rate, repayment terms, administrative fees, NSF fees and any other fees involved should be compared to understand which loan terms work the best for you. While a low-interest rate with a short repayment term may work for one person, another may prefer a longer repayment period even if it means they get a slightly higher rate. Be sure the calculate the fees involved, as some lenders may offer a low rate but compensate it through high fees.
How To Apply For A Personal Loan In Ontario?
If you want a personal loan to pay for something essential, the time to apply is now. Loans Canada can help set up with a lender in Ontario who can offer you terms and conditions that best meet your needs. Simply click the “apply today” button to get started!
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