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Life is a lot tougher when you have constant expenses to deal with, especially if those costs outweigh your income. Don’t worry, there are plenty of other payment solutions available in Burlington, such as personal loans.
Take a look at the information below to learn whether a personal loan is the right credit product for your current financial situation.
How Can a Personal Loan Help Me?
A personal loan is a specific lump sum of cash that you can borrow from the majority of lenders in Canada. Although approval requirements vary from lender to lender, all you usually have to do is fill out an application, have your banking information and credit inspected, then wait for the results.
How to Collect and Repay Your Loan Funds
While some Burlington lenders offer several payment options, such as cheque and e-Transfer, most will send the loan money to your bank account via direct deposit soon after your application is approved. You will then repay your borrowings through divided installments over several months, possibly several years if the loan is big enough.
A personal loan can be a significant financial responsibility, so it’s best to use it for important expenses rather than unnecessary consumer goods, such as:
- Repairs, accidents and other vehicle costs
- Maintenance, utilities, and other household bills
- Vacations or unexpected travel
- Elective surgeries or other medical expenses
- New appliances or other large purchases
- Various financial emergencies
How Can I Get Approved for a Favourable Personal Loan?
Luckily, there are plenty of lending businesses in the Burlington area where you can apply for a personal loan, such as banks, credit unions, and subprime lenders with physical branches. You can also find many online lenders that take in clients from Ontario (some don’t service all provinces and territories).
That said, there are a number of reasons why you may or may not be eligible for a personal loan, as every lender has various approval restrictions. In fact, when you apply, the majority of lenders will inspect your:
- Income
- Current debt levels
- Employment status
- Canadian residency details
- Bank account information
- Credit report
- Assets (for secured loans)
The stronger your finances and credit are, the easier it is for you to make payments on time, so you’ll typically have better chances of approval for larger loans. Lenders also use your financial health to determine your interest rate and the conditions of your repayment plan, so take the following measures prior to applying:
- Hold down a steady job for at least 3-6 months
- Earn a minimum monthly income of $1,000-$2000
- Consolidate as much unpaid debt as possible
- Save up a decent bank account balance
- Check your credit report for mistakes and identity fraud
- Increase your credit score to the 660-900 mark
What If Your Finances Aren’t Great?
Unfortunately, getting approved for a favourable personal loan is harder when you have a low income, a bad credit score of 300-600, or recurring debt problems, as lenders see these issues as potential signs that you’ll default on your upcoming payments.
Don’t panic, because there are plenty of subprime lenders in Burlington who will approve you for a bad credit personal loan. However, if your finances are weak enough, that loan could be relatively small and have a very high-interest rate.
If you’re looking to access a cheaper, more favourable personal loan, it may help to reduce the risk that your lender would be taking on you, which can be done by:
Applying for a secured loan – While this is not an option with some lenders, others will allow you to offer up collateral as loan security. This would have to be an asset, such as your home or vehicle. Be careful, because the lender would be able to sell your asset if you default on too many installments. However, the more valuable your security is, the better your personal loan conditions will be.
Finding the right cosigner – Some lenders will let you apply for a guarantor loan, wherein a stronger borrower cosigns your application, thereby agreeing to take over your payments if you cannot afford them. Make sure your cosigner understands this responsibility, as their finances and credit could get damaged if they also default.
How Will a Personal Loan Affect My Credit?
When it comes to personal loans and other credit products in Burlington, it’s important to know that many lenders send their clients’ payment activity to Canada’s leading credit bureaus; Equifax and TransUnion. As mentioned, they may also contact these bureaus to inspect your credit report when you apply.
If that’s how your lender operates, this is what could happen when you apply and throughout your repayment plan:
- A hard inquiry will show up on your credit history for several months and decrease your credit score by a few points each time you apply.
- If approved, a new credit account will be created for the loan and receive a specific credit rating that goes up and down according to your payments.
- From that point on, any complete payments will elevate your credit score and make you a stronger credit user.
- The opposite will occur with every late, incomplete, or missed payment.
- All this information stays on your report for a few years and lenders may use it to judge your creditworthiness when you apply in the future.
The Importance of Maintaining Good Credit
It’s clear that a personal loan can be healthy or dangerous for your credit, which is why it’s essential to follow your repayment plan responsibly. Not to mention, defaulting consistently can cause you to rack up a lot of unmanageable debt and make you look like an irresponsible borrower.
So, it’s best to only apply for a personal loan in Burlington if you:
- Work with a lender who reports to at least one credit bureau
- Are able to pay your installments on time, even if you become unemployed
- Reduce or totally avoid any unnecessary debts during your plan
Credit Cards vs. Personal Loans: Which Should I Choose?
Before you apply for a personal loan in Burlington, it’s a good idea to weigh your options, since this product may not actually be what’s right for your situation. Actually, if your expenses are smaller or less essential, it might be better to just use your credit cards instead.
Then again, a credit card can have just as many benefits and drawbacks as a personal loan, so be sure to consult a financial expert and get all the information you need.
A credit card may be better than a personal loan because:
- Getting approved and paying for things is much easier
- Some cards come with perks (roadside assistance, travel points, etc.)
- You can make minimum monthly payments to avoid any penalties
- You can make multiple payments per month to boost your credit score faster
- Defaulting comes with slightly less risk than a personal loan
- You won’t have to pay any interest if you don’t actually use your card
A credit card may be worse than a personal loan because:
- The variable interest rates they come with maybe higher
- Minimum payments and overspending can lead to a lot of debt
- Carrying too much unpaid debt decreases your credit score gradually
- Your revolving credit limit may not be enough to cover your expenses
- You’ll have to pay interest on your outstanding balances
- Rewards cards typically come with yearly fees
A personal loan may be better than a credit card because:
- You can possibly access a larger amount of money than any credit limit allows
- It may come with a lower fixed rate that’s easier to factor into your budget
- It adds variety to your credit accounts, which is good for your credit report
- Complete and timely payments make you a more creditworthy borrower
- More credit means you can cover heftier expenses and financial emergencies
- Approved funds may be deposited within a few business days, whereas it can take over a week to receive and activate a credit card
A personal loan may be worse than a credit card because:
- Your installments are mandatory, regardless of whether you use your funds
- Missing payments can result in more severe debt collection penalties
- You could lose an asset if you default too often (secured loans)
- Your cosigner could endanger their finances (guarantor loans)
- Defaulting in any way causes heavier damage to your credit report
Ready to Apply?
If you’re looking for a personal loan in Burlington, don’t forget to contact the experts at Loans Canada. It’s our goal to link you up with the best lenders and interest rates in your area today.
