Discover Your Options: Personal Loans

Do you want to apply for a personal loan, but you’re unsure about your options? Say you have good credit. Then you likely wish to get approved for something with a preferable interest rate and favourable loan payments. Maybe, you need a car loan—but only if there are reasonable interest and fees, which you won’t get with your credit card. Alternatively, you could be seeking out an unsecured personal loan, secured loans, instalment loans, or any other way to borrow money.

Regardless of your needs, there’s plenty to choose from when it comes to securing financial assistance. Your best option depends on your needs and current finances. An array of factors dictates the ideal personal loan for you, on top of whom you should borrow. Other matters, such as your credit score, will play a pivotal role in where you send in your application for approval. This all might seem like a lot to take in, so read the following content and learn key facts about personal loans.

Get the Best Rates for a Personal Loan

According to business insider, the average personal loan interest has been in a continual state of flux over the past half-decade.

Let’s further illustrate:

During 2020’s first quarter, the average 24-month personal loan interest was 0.69%, a drastic decrease from the comparatively astronomical 9.63% in 2019.

The APR on personal loans will differ, depending on what platform or from which financial institution you’re borrowing.

What’s important is never settling on the first lender you come across. After all, you might be open to more favourable rates than what you think is available. It merely takes some digging to find out.

Finding superior rates makes for more breathing room that benefits your FICO score in the long run.

Provided your credit score isn’t optimal, there is still a wealth of options for you to procure unsecured loans. You need to perform more due diligence to find someone you can borrow from and whose rates won’t send you into bankruptcy.

Benefits of a Personal Loan

First and foremost, personal loans can be used for anything. When you take out a mortgage, for instance, it can only be spent on your home.

On the other hand, a personal loan can be used on your home, car, emergency repairs, debt consolidation, credit card payments, and anything else of importance. There are no limitations. Moreover, you can borrow a wide range of money, from a few hundred dollars to hundreds of thousands of dollars.

Compared to credit card rates (averaged at 15.99%), personal loans are much more generous. And your loan payments are in fixed monthly instalments, with the same APR.

Note that personal loans don’t require collateral since they are unsecured. Plus, you don’t need to have pristine credit to get approved. More traditional financial institutions tend to be incredibly stringent, putting you through the wringer, only for your application to get rejected.

Personal loans don’t take long to approve, and you receive your funds almost immediately. This is useful because when you’re in a pinch, you require money fast.

Personal Loans FAQ

Read below, as we provide answers to questions we’re frequently asked about personal loans in Canada.

What is a Personal Loan?

Personal loans necessitate someone borrowing money for individual needs.

There are these three following aspects specific to all personal loans:

• A promissory note that acts as evidence of the debt.
• The principal, which is the amount borrowed.
• An interest rate, which is the cost of borrowing.

Another term for personal loans is consumer loans.

How do I Apply for a Personal Loan?

Here’s a brief description of the best practices you should follow when applying for a personal loan:

• Figure out your credit score so you know which lenders will approve you:
  • Many lenders have a minimum requirement (though plenty of personal lenders will approve people with scores as low as 500).
• Decide your borrowing amount.
• Learn your rights as a consumer:
  • Lenders must disclose the APR, finance charges, amount financed, fees, penalties, etc.
• Ensure you have the required documentation.
• Look around and research the best lender for you:
  • The more you look, the likelier you’ll find the ideal loan to fit your personal and financial circumstances.
• Fill out the application with your chosen lender:
  • There is an influx of online personal lenders, so you can do this from your own home’s comfort.

What do You Need to Apply for a Personal Loan?

Depending on the lender, you might need the following information:

• Your annual income
• Debt-to-income ratio
• Social Security number
• Recurring monthly debt (e.g., mortgage payments)
• Information about whether you rent or own your primary residence
• Your employer’s and how long you’ve worked there
• Personal Identification

Not all personal lenders will need all this information, but it’s always good to have it on hand.

Why do Personal Loans have High Interest?

Personal loans are usually unsecured, meaning there’s no collateral. The higher interest acts as further incentive to make payments, and additional security for the lender.

Can I Refinance My Personal Loan?

Yes, refinancing a personal loan is possible, often done by finding a loan with lower interest rates to save money. The process necessitates applying for a new personal loan, then taking that money and paying off the previous debt.

How Much Can a Personal Loan Be?

Commonly, personal loan amounts don’t exceed $50,000.

Though, that doesn’t mean there’s a hard-and-fast limit. Some institutions will loan you $100,000 if your income and credit score are substantial enough.

The amount you can receive hinges on the strength of your application.

Do Personal Loans Hurt Your Credit?

In the immediate aftermath of applying and receiving your loan, your credit score will be slightly dinged. However, if you make your payments on time and in full, your score will replenish and repair—if not improve.

The lesson here is if you’re going to take out a loan, pay on time, and your credit will be healthy in the long run. Defaulting or making late payments will be what does any potential damage.