Let’s face it, life is expensive. Owning a home, buying and maintaining a car, buying groceries, the costs can add up. Luckily, most of these exepense can be covered by your monthly income.
But, for larger or unexpected expenses, taking on some good debt is often necessary. Anyone looking to apply for a loan should keep an eye on credit. Having a healthy credit score and history can help the appplicaiton process smoother. Want to check your credit score for free? Check out CompareHub.
This is particularly true when unexpected expenses pop up. To help cover the costs of a large or emergency expense, a loan from a private lender can help.
What Is A Private Lender?
As you could imagine, a private loan is a loan from a private lender. But what makes a lender “private”?
Essentially, a private lender is any lender who is not associated or affiliated with a traditional financial institution. Normally, these private lenders are not as constrained by regulations and have much more flexible lending requirements. They often accept borrowers that banks and other traditional financial institutions reject due to poor credit.
A private lender can be a company, a group, or even simply an individual. The private loans that they offer work very similarly to the loans offered by a bank or other traditional financial institutions.
However, because they accept borrowers with poor credit or finances, many private lenders will charge slightly higher interest rates to protect themselves from the additional risk they take. Of course, the actual rate and the terms of each lender will vary.
Where Can You Get A Private Loan?
- Up to $50,000
- Prime to 46.96%
- 3-60 months
- $1,000 - $10,000
- 19.69% - 46.9%
- Up to $35,000
- 9.99% - 46.96%
- 6 - 60 Months
- $1,000 - $25,000
- 7.5% - 31.5%
- 36 - 60 months
- $5,000 - $35,000
- Starting at 9.99%
- 6 - 60 Months
- $500 - $1000+
- 28% to 32%
- 3 Months
- $500 - $12,500
- 19.99% to 34.99%
- No minimum term
- $500 - $100,000
- 9.99% - 46.96%
- $300 – $35,000
- 9.9% - 47.72%
- 3 - 60 Months
- Up to $50,000
- 19.99% - 39.99%
- 6 - 120
What Requirements Do You Need To Apply For A Personal Loan With A Private Lender?
The requirements required are dependent on the lender you choose to apply with. However, in general, most lenders will require:
- Age – To be 18+ years old or the age of majority in your province
- Income – To have a reliable source of income
- Debt – To have a reasonable debt-to-income ratio
Steps On How To Choose A Private Lender
How To Find A Private Lender In Canada?
Step 1 – Know What You Want
Depending on where you live, there is a very good chance that there are multiple private lenders in your area that would be willing to work with you. So how do you go about finding one to work with?
You should have a good idea of the type of loan you’re interested in. Different lenders will have different specialties and will work better for certain situations. Know the kind of loan you want, how soon you need it, and how large it should be. Once you know what your needs are, next you need to look closer at the available options.
Step 2 – Compare Lenders
This is the research phase of the process. Look for an online presence for any private lender you might want to work with. Do they have any online reviews? Are the reviews good or bad? Does it seem like they have a good reputation? Are they advertising their rates, terms, conditions, fees, etc.?
During this research phase, you should be able to weed out the good from the bad in your area. The lender you ultimately go with should have a good reputation, offer what you need, have impressive experience, and be somebody you are comfortable working with.
Step 3 – Apply
Once you’ve found a private lender that you like, you can apply for the loan. Depending on the lender you can get funded within a few hours to a couple of days after approval.
Differences Between Banks, Credit Unions And Private Loan Lenders
|Types Of Lenders||Definition||Approximate Interest Rates||Lender Examples|
|Banks||Major financial institutions like Canada’s Big Five banks offer personal loans. They generally offer the best rates but have strict requirements.||0.5% - 15%||- TD|
- Laurentian Bank of Canada
|Credit Unions||Credit unions are non-profit organizations that are owned by their members. They offer smaller loans than banks but rates are still affordable. Requirements are also more flexible than banks, but you must be a member (of the credit union) to get a loan.||3% or more||- Fusion Credit Union|
- First West Credit Union
- PACE Credit Union
- DUCA Credit Union
- Meridian Credit Union
- Vancity Credit Union
- Ganaraska Financial Credit Union
|Private Lenders||Private lenders are easier to qualify for than banks due to their flexible lending standards. Even those with poor credit may qualify, however, they often charge much higher rates than banks, making them a more expensive option.||8% - 35%||- Loanz|
- Spring Financial
- Consumer Capital Canada
Types Of Loans Offered By Private Lenders
Private lenders offer many of the same loans you expect from banks. Some popular loans you can find with a private lender in Canada include:
In Canada, there are numerous private companies and individuals who offer private mortgages. These mortgages are often easier to qualify for as these lenders are not federally or provincially regulated like the banks. Meaning the stress test and other requirements are not enforced. However, these private mortgage lenders typically charge higher interest rates and can have shorter terms than banks.
Private Auto Loans
Like mortgages, there are also a number of private auto lenders in Canada that offer auto loans. You can get a private auto loan straight from the lender or through car dealerships that partnered up with private auto lenders. Many dealerships do this in order to provide financing to individuals with good and bad credit. However, like any private loan, it often comes with high-interest rates and fees.
Private Student Loans
While the Government of Canada offers many student loan programs on a federal and provincial level, not everyone can qualify for them. That’s when some students have to rely on private student loans. Depending on your private lender, they may offer you a grace period after graduation, however, some may require payment right away, like a regular personal loan.
Personal Installment Loans
Like banks and other traditional financial institutions, private lenders also offer personal installment loans. It works the same as the one you’d get from a bank, except the interest and fees charged will be higher. You may also not get terms that are as flexible. However, if you’re someone who is struggling to get a personal installment loan from a bank, you’ll likely find a private lender who’d be willing to lend to you.
Can You Get A Loan With Bad Credit From A Private Lender?
While some private lenders will work with individuals with bad credit, others may not. As mentioned previously, each private lender has their own set of requirements and will decide what loans to offer, and what rates or terms will accompany those loans. It’s always a good idea to ask your private lender about their eligibility requirements before applying.
If you have unique borrowing needs, don’t be afraid to ask a lender if they will be willing to help you out. They will generally be more willing to do so than traditional lenders.
The Benefits Of Working With A Private Lender
Now that you know how to find the right lender, what are the benefits of working with a private lender over a traditional financial institution?
- Convenience – One of the first and most important benefits simply comes down to convenience. Private loans are often easy to apply for and can be completed online.
- Fast Approval and Funding – Many private lenders have an automated underwriting process that quickens approval decisions. Some lenders even provide instant approvals, which is great for those who need cash urgently.
- Personalized Service – Another great benefit of working alongside a private lender is that they can offer personalized service. They will work directly with you to find a good solution for your needs and are generally more flexible and willing to make changes if need be.
- Low Requirements – One of the major attractions of private lenders is their flexible requirements. Many accept borrowers with poor credit, which is a major hurdle when applying to banks. Moreover, private lenders often look at your overall financial health rather than just your credit score. So if you have a high income, low debt and a stable job, your chances of getting a loan from a private lender are high.
- Flexible Terms – The terms of these private loans are also more relaxed, which is great for reducing stress. Many will offer flexible repayment plans that most traditional lenders simply cannot offer their clients. Of course, these loans aren’t perfect, so be sure to read the fine print and be aware of everything you’re agreeing to before signing anything.
When Is It The Right Time To Choose A Private Loan?
As a Canadian consumer, there are countless borrowing options to choose from so it can be difficult to decide when to go with a private lender. But the good news is that private lenders offer unique opportunities for borrowers to gain access to the funds they need. Here are a few situations where a private lender could be the right choice for you.
If You Have Bad Credit
For those consumers that have less than favourable credit, a private lender is often more willing to work out a deal that takes into consideration more than your credit score.
As an Alternate Option
First, it may be your only option. If traditional banks and institutions won’t offer you the loan you require, the next logical step for you is to go to a private lender. They might not offer you one based on your request, based on your credit, or your overall financial situation. Many private lenders are willing to work with a larger variety of people than banks or credit unions.
You’re Looking For Quick Approval
Another great situation to make use of a private lender is when you need money quickly. Many traditional lenders take longer to approve applicants and get them the money they need. If you want quick approval, private lenders are certainly a good option.
If They Offer The Features You Need
Also, you might simply find, during your research, that the benefits and features offered by private lenders match up with your needs better than traditional lenders.
Private Lender FAQs
Can I get a personal loan from a private lender if I have bad credit?
Can I get an unsecured personal loan with a private lender in Canada?
Are there any drawbacks to private lenders?
Looking For an Alternative Lender?
Loans Canada works with a wide variety of lenders and service providers to help you find the best fit for your needs. We are confident we can help you by matching you with a great lender in your area.