Loan Calculator

Credit score


Interest Rate
%
Loan amount
$
Term


Number of Payments

An error occurred

Payment

An error occurred

Total Interest

An error occurred

Total Payment

An error occurred

Throughout your life, you’ll have plenty of expenses to consider, some of which are smaller and can be paid for easily, while others are more costly and need to be financed over time.

If you’re in the market for a loan, whether it’s to cover the cost of an unexpected expense or make a large purchase, our loan calculator can help you estimate monthly payments which will allow you to figure what your budget is.

When applying for a loan, avoid these common application mistakes.

Finding Your Loan

Generally speaking, a loan is a lump sum of money that you can apply for through various financial institutions, otherwise known as lenders. However, there are many loan types available, each of which can serve a different purpose.

There are mortgages to purchase homes and car loans to finance the purchase of a new or used vehicle. Then there are traditional installment-based loans, which can be used to cover just about any expense.

Choosing Your Lender

When looking for the right loan, chances are you’ll be faced with a few options when it comes to your lender.

You can choose a prime source, such as a big bank or credit union, where getting approved is a bit more difficult but loan conditions are more favorable. You can also apply with a subprime institution, like a private or alternative company, where approval standards are more lenient and loans slightly higher in cost.

Either way, the application and repayment processes will be relatively the same. When applying, your finances be checked to evaluate how risky you are as a potential client.

During the application process, your lender may request proof of your:

  • Name and address
  • Employment history
  • Gross monthly/yearly income
  • Banking information
  • Recent debts
  • Credit report and credit score
  • Assets (house, car, etc.)
  • Cosigner’s personal/financial information (if any)

The more qualified you are to manage your loan payments, the more chance you’ll have of getting approved for a larger loan at a reasonable interest rate and a flexible repayment plan. This is particularly true when it comes to prime lenders.

If you have a low income and/or bad credit, you can still get approved for a subprime loan. Just be aware that, due to the increased level of risk you pose, your loan is likely to be smaller, have a higher interest rate, and a less negotiable repayment plan.

Applying With a Cosigner

One way that you can earn better loan conditions, as well as avoid defaulting is by applying with a cosigner (click here for more information).

They would need to be someone that’s trustworthy, has healthy finances, and decent credit. Essentially, by cosigning, they are agreeing to take over your payments if you cannot afford them, which would at least prevent any debt collection penalties.

Nonetheless, before you apply together, make sure that your cosigner is fully aware of the potential consequences. If they should become responsible for your payments and also have trouble affording them, their finances could end up just as damaged as yours, leading to unmanageable debt, bad credit, or worse.

Applying With Collateral

If you don’t have a cosigner, you can also see more positive loan results by offering up one of your assets as collateral (typically a house or vehicle), which also decreases the risk for your lender. Just need in mind that should you default on a secured loan your lender could potentially cease your asset.

The True Cost of BorrowingDo you know what the true cost of borrowing is? Find out here.

Repayment Plans

If you’re qualified to handle all the costs associated with the loan, the appropriate funds will be sent to your bank account soon after you’re approved, typically by direct deposit, cheque or e-Transfer.

You would then repay your borrowings through equally timed and divided installments over several months to several years. With prior negotiation, many lenders can also adjust your plan to allow for accelerated (larger or more frequent) installments.

Although the size and consistency of your installments will also vary, most lenders will offer numerous options, such as:

  • Monthly (12 payments yearly)
  • Semi-monthly (24 payments yearly)
  • Weekly (52 payments yearly)
  • Bi-weekly (26 payments yearly)

A loan can put you in debt for quite some time, so it’s imperative to choose the length and frequency of your payments carefully. Before you apply, be sure to have a reliable source of employment, as well as enough savings to cover yourself if you should become unable to work.

Hidden Costs

If you do plan to make accelerated installments at some point, it’s important to first ask your lender whether they charge a prepayment penalty for deviating from your original plan. With that in mind, it’s also important to be fully aware of all the other costs that may be included in your final loan balance.

Along with your installments and possible prepayment penalty, you must consider any other mandatory/hidden costs, such as:

  • Interest – Every lender will charge an interest rate on your loan payments. That rate can vary depending on where you apply and how qualified you are. Some lenders offer two kinds of rates. A ‘fixed’ rate won’t change during your repayment plan, so it’s easier to calculate. On the other hand, a ‘variable’ rate will fluctuate according to Canada’s prime rate, helping you save money.
  • Penalties – Although you may be able to afford your payments now, you must be aware of what happens if you default on them. Whether you’re late, short on, or you miss a payment entirely, a penalty can be applied for breaking the rules of your loan contract.
  • Fees – Before you apply, be sure to get a price quote, as some lenders will tack on certain fees for loan origination and administrative purposes.
  • Taxes – Depending on your lender’s policies, as well as your province, your loan may also be accompanied by various taxes, such as HST (Harmonized Sales Tax), GST (Goods & Services Tax), and PST (Provincial Sales Tax).

Watch Out for Loan Scams

When comparing loans, it’s also vital to research your potential lender properly. Unfortunately, this is because there are many predatory organizations and scam artists looking to take advantage of your need for credit.

One way they may do this is by charging “loan insurance” in exchange for a substandard or totally fake loan. No legitimate lender will ever ask for it before depositing your loan since such demands are illegal.

In fact, you should avoid any “lender” that charges any sort of fee in advance, offers to guarantee your approval with no questions asked, or doesn’t have confirmable business credentials.

How to Budget for Your Loan Payments

Remember, a loan can put you in debt for a long time, so it’s essential to use our Loan Calculator, then factor the cost of your payments into your budget before applying.

If your payments are outside of your budget, there are a number of ways that you can avoid the cycle of debt that may occur, such as:

  • Request a smaller loan amount
  • Ask for overtime hours or a raise at your current job
  • If your income is insufficient, apply for a secondary job
  • Consolidate any other outstanding debts
  • Request to have your payments reduced and/or repayment plan extended

Canadian Credit ScoreTake a look at this infographic for more information about credit scores.

Why Your Credit Score Matters

For loan types, the strength of your credit will be an important factor during the approval process, because it showcases how likely you are to make payments as agreed. This is particularly true when it comes to your three-digit credit score.

Ranging from 300 to 900, prospective lenders can view your score whenever you apply for new credit, which they may do while examining your credit report. If approved, your score will fluctuate according to your payment activity until your loan is fully repaid. If you make a responsible payment, your score goes up, giving you better credit. If you default, the opposite will occur.

The closer your score is to 900, the stronger your credit is considered. Since good credit usually means you have less chance of defaulting, lenders will be more likely to approve you for a larger loan, a lower rate, and a more adjustable plan.

Although every lender has different standards and some don’t perform credit checks at all, it’s best to have your score within the 650-900 range before you apply in order to see the most positive results.

Check out this article for more information about what your credit score range means.

Here are a few things you can do to obtain a good credit score:

  • Request a free yearly copy of your credit report from Canada’s credit bureaus (Equifax and TransUnion)
  • Regularly check both versions of your report for errors, fraud, and identity theft
  • Don’t apply for too much new credit within the same year
  • Complete your payments as scheduled and avoid defaulting at all costs
  • Make more than one credit card payment per month
  • For credit cards and lines of credit, make minimum payments when you can’t afford full ones, but avoid using more than 30-35% of your available credit limit

The Right Time to Apply

Like any credit product, a loan should only be applied for when you are financially prepared to handle all your payments. Since defaulting can result in bad credit and create all sorts of financial problems for you, make sure you have a steady income, a good credit score, and even some security to offer, such as a cosigner or collateral.

Calculate Your Loan Payments Today

If you are currently having trouble deciding whether or not you’ll be able to afford your upcoming loan payments, just take a look at our loan calculator above. Budgeting for your loan has never been easier.

From the blog...
Loan Away With Loans Canada
Posted on September 10, 2019
Loan Away With Loans Canada

From personal loans to cover the cost of a large expense to short term emergency loans to help deal with an unexpected event, Loans Canada can help you move away from unhelpful or unaffordable financing and gain access to the best options for your needs. Getting approved for a loan… Read More

Can I Use a Personal Loan For Emergencies?
Posted on July 24, 2019
Can I Use a Personal Loan For Emergencies?

For this blog, we’ve teamed up with our partners at Fairstone Almost half of Canadians are $200 away from not meeting their financial obligations each month. You’re not alone if you fall into this category, but being cash strapped can make it difficult to tackle unexpected expenses. … Read More

Have You Made These Mistakes on a Personal Loan Application? 
Posted on April 24, 2019
Have You Made These Mistakes on a Personal Loan Application? 

Applications for personal loans can be daunting, sometimes there is so much to read and interpret. For this reason, many applicants make mistakes on their application. Unfortunately, filling out an application incorrectly can result in your loan being rejected, regardless of how minuscule the error is. To better your chances… Read More

What is Negative Equity? 
Posted on April 19, 2019
What is Negative Equity? 

Equity is defined as the total value of an asset less the owed obligations. Individuals want equity in their assets to be positive because it means they will make money if they were to sell the asset. Sometimes individuals do not have the fortune of positive equity, instead, they have… Read More

What is a Lienholder?
Posted on April 2, 2019
What is a Lienholder?

If you’ve ever held a mortgage or car loan, then you’ve had a lien placed on the title of your home or automobile. And if you’ve ever been involved in a situation where you owed money to a contractor or have been involved in some sort of legal judgment… Read More

What is a Balloon Payment?
Posted on April 1, 2019
What is a Balloon Payment?

Balloon payments are a non-traditional form of financing that involves little to no payments at the beginning of the loan’s term followed by a substantially larger lump sum payment due at the end of the loan’s term. Typically borrowers who want to use this type of financing must have great… Read More

Note:

All consultations and conversations with Loans Canada and its partners are confidential and risk-free. Speak with a trusted specialist today and see how we can help you achieve your financial goals faster.

Loans Canada and its partners will never ask you for an upfront deposit, upfront fees or upfront insurance payments on a loan. To protect yourself, read more on this topic by visiting our page on loan scams.