How to Apply for a Personal Loan in Canada

Before you apply for a personal loan in Canada there is some work that should be done. Not only will this expedite the process, but it may lessen the chance of being denied or not getting as good of a deal as possible.

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Before you apply for a personal loan in Canada there is some work that should be done. Not only will this expedite the process, but it may lessen the chance of being denied or not getting as good of a deal as possible.

How much do you need?

The first task you’re going to want to calculate is the amount of the loan that you’re going require. It’s important to know how much you need so you don’t request too little or too much. If you obtain more money than you actually need you’ll pay more in interest.

Secured vs. unsecured loans

There are two types of personal loans available to people in Canada, secured and unsecured. A secured loan uses part of your property, usually a house or car, as collateral while an unsecured loan isn’t attached to anything you own. Secured loans usually charge less in total fees and interest because the bank can take your property if you stop paying the loan. An unsecured loan creates more risk for the bank so they charge a higher interest rate, but this type of loan is ideal if you don’t own a house or don’t want to risk your vehicle.

Interest – fixed vs. variable rates

Banks also offer two types of interest rates, fixed and variable. Fixed rates usually charge a little higher interest rate because the bank is taking the risk that interest rates will not rise above the rate they’re charging. A variable rate loan puts the risk on the consumer, but if interest rates remain low they can save quite a bit in interest over the lifetime of the loan.

Why do you need the loan?

Once you know which type of loan you want and go to your financial institution, one of the first questions they’re going to ask is the reason for the loan. The bank has an obligation to insure that you’re using the money for a legal purpose, so they require you to explain where the money will be used. Common uses for personal loans include:

  • Consolidating debts
  • Paying for unforeseen bills
  • House repairs
  • Vacations

Scheduling an Appointment

After scheduling an appointment with your bank representative, they will ask for all the details of your loan as well as review your financial information. This ensures that you are using the money for a lawful purpose as well as being able to pay the loan back to the bank.

What if I have little or poor credit?

When banks review your finances, they may determine that you’re at higher risk than normal. When this happens you may still be able to acquire a loan, but they may require you to take out insurance on the loan. Then if you’re unable to pay back the loan and default, the insurance company will pay the bank.

Being well prepared before you schedule an appointment with the bank will ensure that the process goes smoothly. A little homework beforehand can not only save you money but avoid unnecessary delays.

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