Loans in Canada: Mortgage, Payday, Auto & Personal Loans



AUTO Loans

People need loans more often than you might think. The amount of Canadians that have some sort of a loan is rising, which is not necessarily bad. Loans help us get all the things we need and want, and provide people with ways to get them now and pay them off later. There are many different types of loans, and with different loans, different rules apply. To get a better perspective on loans in general, you’ll have to read all the intricate information in this article. Below, we’ll discuss everything there is to know about a loan and help you decide which one is right for your unique needs.

Canada Loans 101. What is a Loan?

A loan is a sum of money that is borrowed to you by the lender. To get a loan, you must apply for one and get approved for it. Aside from this, you’ll have to sign a legally binding contract that ensures that you’ll pay the loan off after a specific amount of time, with or without interest.

Depending on the type of loan, you can pay it back either in rates or at once. More often than not, most loans will have interest rates on them, which is the percentage of the overall sum you have to pay additionally.

The interest rate is set by the lender and agreed upon by you. Based on the type of loan you’re borrowing, the interest rate will vary wildly. Some loans have a minuscule, symbolic interest rate, while others can stack up to a pretty penny.

Multiple factors go into loans and a lot of things you have to consider before applying for one. If you’re thinking of getting a loan, you’ll have to do a lot of research beforehand. We’ll cover this a bit later in this article.

Another thing that goes into loans is down payments. Down payments are initial payments that you may pay to the lender to decrease your interest rates, reducing the amount you have to pay over time.

Loans are also subject to APR, so that will rack up as an additional fee on your loan payment. Many fees go into getting a loan, and the process isn’t as straightforward as most people think.

Before you get a loan, you’ll have to do quite a lot of research into your finances and loan options, and find out if you can handle the loan. Never borrow more than you can afford, as that could lead to some less than desirable consequences.

What Should You Look for?

There is a type of loan for everyone, and there are as many types as you could imagine. Finding the ideal loan for yourself won’t be an easy task. Based on your unique needs and wants, you’ll want a different type of loan. Below, are some of the things you should look for when you’re thinking about taking a loan.

Minimum Requirements

Most loans will require at least a decent credit score. Credit score makes the financial world go round, and having one that’s of a desirable amount is essential for your financial wellness. Ensuring that your credit score is as good as possible will allow you to get virtually any loan you desire.

But, if you need a quick loan, you might not have an ideal credit score. A lower credit score will result in larger interest rates, which are not in your interest. Find a lender and loan type that fits the credit score you have, and gives you the lowest interest for it.

Secured & Unsecured Loans

Loans can be secured or unsecured. Secured loans are tied to a piece of your property, such as your car or your house. Unsecured loans aren’t tied to anything. Secured loans have significantly lower interest rates than unsecured loans. If you can afford it, always get a secured loan.

Interest Fees & APR

Interest fees are fees that you have to pay in addition to your loan. They are expressed as a percentage of your loan that adds up to the overall figure. APR is not the same as an interest rate, as it includes all the fees and costs associated with procuring your loan. Minimizing the two will ensure you’re paying as little as possible for your loan.

Repayment Flexibility

When you’re getting a loan, repaying it is essential. That is why you need to find a loan that has flexible repayment. Find a plan that fits your unique needs and capabilities. Most lenders will have flexible payment plans or early repayments. Seek a lender that offers you these features.

Superb Customer Service

One thing you always want when dealing with financial institutions is superb customer support. If you run into any kind of problem, resolving it could save you a lot of money and nerves. Always seek out a lender that has superb customer service.

What are the Types of Canada Loans out there?

People need money for a lot of reasons, and lenders understand that. That is why there are many different loan options offered by lenders. Below, we’ll overview some of the most popular types of Canada loans, their purposes, and what they can do for you.

Personal Loans

Personal loans are loans for anything you like. If you want anything that will cost any amount of money, you can apply for a personal loan. That includes vacations, larger purchases, credit card debt, or anything you like. These are dependent on your credit history, so you might not be eligible for one unless it’s good. The interest rates on these types of loans are usually high.

See Available Canada Personal Loan Offers

Payday Loans

Payday loans are smaller loans that should help you get by until your next paycheck arrives. They’re usually small in amount but do have high interest rates. Payday loans are pretty expensive in the end, and they’re not advised for most people.

See Available Canada PayDay Loan Offers

Auto Loans

Auto loans are loans for your automobile. Just like mortgage loans, they are strictly tied to your vehicle, so if you fail to pay all of your dues on time, your car might be impounded. Unlike mortgage loans, auto loans can be offered by automobile dealerships. These types of loans have relatively high-interest rates, too.

See Available Canada Auto Loan Offers

Debt Consolidation Loans

Debt consolidation loans are meant to refinance your outstanding debts and make them easier to pay off. These are most often used for credit card debts, and result in fewer and lower interest payments.

Small Business Loans

If you’re thinking of starting a small business and are looking for some starting money, you might want to get a small business loan. Small business loans offer initial funding for a small company started by aspiring entrepreneurs. While these can be private, they can be federal as well. The interest rates on these loans are medium.

Mortgage Loans

Mortgage loans, more commonly known as mortgages, are loans offered to potential new homeowners looking to purchase a property that they can’t afford to pay for upfront. A mortgage loan is closely tied to the property purchase, and failing to pay one will result in foreclosure. These types of loans have very low-interest rates when compared to other loans.

Home Equity Loans

Home equity loans are designed to help you pay for big projects regarding your home. As long as you have equity in your home, you can apply for a loan like this. If you take up a home equity loan, your home is considered collateral, so you might want to think twice before getting one. These types of loans come in dramatically different packages, which means the interest rates vary wildly. They’re used for renovation, major remodeling, or additional construction.

Aside from these, there are many more types of loans out there. These are just the most popular options. If you need a loan, make sure to contact your local lender and determine which option might be best for your unique needs.
Never overstep your capabilities, especially if you are getting a loan. Loans are financial obligations, so make sure to get one that you can handle.

How to Get Approved for a Canada Loan?

Getting approved for a loan is not hard, as long as you’re ready to prepare for it. To get approved for a loan, you’ll have to pick a loan type you would like. Always go with the secured option if you can afford to.

  • Before you apply for a loan, you’ll have to check your credit score. Most loans will trigger an inquiry into your credit history, so if you don’t have a good credit score, it could further hurt your credit score.
  • If you don’t have a substantial enough credit score, you’ll have to improve it. There are many ways to improve your credit score, and you can start by using a credit reparation strategy.
  • After you have your credit score in order, it’s time to rebalance your debts and income. When you’re applying for a loan, you’ll have to provide all of your financial information, so rebalancing your debts and income will significantly increase your chances of getting a loan.
  • Make a plan for how much money you want. After you’ve chosen the loan type, you’ll have to be reasonable with your wants. Never borrow more than you can pay off, so make sure that everything is in order. If you can afford a downpayment, it’ll be an ideal way to cut down on interest rates.

Finally, to get approved for the loan, you have to find the right lender. Depending on the type of loan, you can find either public or federal loans. If you can, always pick the federal options, as they’re far more user friendly.

  • If you have to go with financial institutions and banks, make sure to do your homework and check every aspect of your possible loan.
  • If you’ve done everything correctly, prepared for your loan, and have the whole process thoroughly thought out, you’ll get accepted in no time at all.
Preparation for application is half of the job, so remember to take as much time as you need to prepare for your loan.

Final Thoughts

Loans are a fantastic way to get what you need or want if you can’t afford it initially. While they serve a fantastic purpose, it’s still essential to remain cautious when you’re getting a loan. Proper preparation, education, and searching will give you the best loan opportunity, no matter what kind of loan you need – just remember, loans are for everyone!

Frequently Asked Questions