On a regular day, most people do not need to borrow money. However, there can be instances when you might fall short or require emergency funds for medical expenses or renovation. In this case, you can always apply for a personal loan. A personal loan is one of the safest and the most inexpensive ways of closing your financial gaps.
In Canada, personal loans are only available for individuals. So most financial institutions and online money lenders have specific conditions for which you can use a personal loan. There are various personal loans, including credit building loans and secured and unsecured loans.
In today’s article, we will discuss how to get a personal loan and how much you can get in Canada. If you are looking for a personal loan rate with reasonable interest rates, you may contact Alpine Credits.
Personal loan
When you apply for a personal loan, you get a fixed amount of money that you agree to pay off within a fixed period of time. The borrower must pay back the entire amount, applicable fee, and interests. You can make regular or monthly payments, often known as installments. Personal loans are also called installment loans, consumer loans, or long-term financing plans.
What are personal loans used for?
There can be multiple reasons why a borrower might take out a personal loan. A personal loan can be used to pay the down payments over the home, cover medical expenses, consolidate debt, buy a vehicle, or undertake home improvements. Most people apply for a personal loan when they cannot cover the entire amount.
You can avail of personal loans from credit unions, financial institutions, banks, traditional lenders, private lenders, pawn shops, and title loan companies.
How much personal loan can you apply for in Canada?
Banks, credit unions, and financial institutions usually offer personal loans ranging from $100 to $50000 within 6 to 60 months. In most cases, online money lenders might offer a larger loan amount which might be more than what you need. However, you need to be careful and not borrow more than your ability to pay back.
How does personal loan work
Here is what a borrower can expect while applying for a personal loan.
Documents you need to submit
Online money lenders will require proof that you have the following:
- Permanent address proof
- Regular income
- Bank account
Most financial institutions and money lenders will perform a hard credit check when you apply for a personal loan. Your credit history and report will help them evaluate your ability to repay the loan. While performing the credit check, they will also consider your debts. Your credit score, credit report, and amount of debt will affect the type of personal loan you can apply for, your loan options, and the interest rate.
Getting a personal loan from a money lender
The money lender, in most cases, will offer you the loan amount in one of the following ways:
- Prepaid card
- Send to you via e transfer
- In cash
- If you are consolidating debt, the money lender can directly send the money to your loan accounts.
- Direct deposit to your bank account.
If you plan to take a loan on your prepaid card, you will need to pay certain charges to activate and use the card.
How to pay back your personal loan?
When applying for a personal loan, you agree to make regular payments on time. So, most money lenders will ask for your banking details to directly withdraw the payment from your account. This is known as pre-authorized debit.
Mostly, money lenders send out regular information about your monthly installments to the credit bureaus, which helps improve your credit score by making payments on time. However, if you are late in making your payments, it might hurt your overall credit score. The borrower might also be allowed to pay off an extra amount or the entire loan before the end of the term without paying the penalty. Therefore, you can save on the interest rates and pay off the outstanding balance earlier than planned. However, some money lenders might also charge a fee or a processing charge if you pay off the entire loan early.
You can also negotiate the terms of your loan agreement with the money lender. This will help you manage your monthly budget if there is a change in your financial situation. However, you might need to pay a certain fee for this service.
Make sure you understand the terms and conditions
Before signing the final loan agreement form, ensure you understand the agreements and conditions. If you have any doubts, always ask the lender. All the federally regulated traders like banks and financial institutions will offer the following information whenever you are applying for a personal loan:
- Interest rate and whether it is fixed or variable
- The total amount of the loan
- Payment amount
- Time duration
- Optional services you are accepting
- Service charges and other fees
Some other lenders who are not regulated or do not fall under territorial regulation might not offer this information.
Who are all eligible for a personal loan?
To apply for a personal loan in Canada, you must be;
- At least 18 years or above
- You need to have a Canadian credit history
- You have to be a Canadian resident
- You need to own a bank account
- You must have income proof and a recent pay slip
- Identity proof like your photo ID, Passport, or driving license
- Residence proof
- Proof of monthly expenditure like rent, mortgage, utility costs, and any previous loan installments.
Additionally, you also need to have:
- A good credit score above 650
- No history of bankruptcy
- Low debt to income ratio
Endnote
You can always apply for a personal loan when you require financial help. With the money, you can plan a trip, pay your medical expenses, renovate your apartment, or buy a car. Whatever you are using it for, with a personal loan comes responsibility and commitment. So you need to make sure that you can pay back the loan amount along with interest in the form of monthly installments, and you have their idea about the interest rates, additional fees, and the term.