How to Choose a Loan
When it comes to choosing the right loan, there are several factors you should take into consideration. how to Get Loans in Canada 2023 Easy Steps.
- What do you need the money for? Since you’re looking to apply for a loan you likely have a reason, this will determine the type of loan and what lender you should choose. If you’re looking for a personal loan for a general reason (such as a vacation or to make a purchase), you’ll have more options to choose from then someone looking for a debt consolidation loan.
- What interest rate are you being offered? When comparing the interest rates of multiple lenders, makes sure you consider the APR as well as the monthly rate. This is particularly useful when trying to decide between several lenders that are offering similar options.
- What type of repayment plans are available? The repayment plan that you choose will not only dictate how often you have to make a loan payment but also how quickly you can pay off your loan. Typically, you’ll choose from monthly, weekly, or bi-weekly payments. If you’re looking to save money and pay off your loan quickly, bi-weekly payments are the best option
- Are there any additional fees? Generally speaking, some lenders will have a couple of fees added to the cost of your loan. But, it’s important that you make sure you aren’t being charged any illegal fees or that the cost of the fees is not higher than the legal limit.
- What do consumer reviews say? When it comes to choosing a great lender to work with, reviews from other consumers can provide much-needed insight. Furthermore, if you can’t find any reviews at all, this could be a red flag.
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How to Apply For a Loan Online
Once you’ve decided on the type of loan and lender that best fits your needs and the lender, it’s time to apply. The easiest way to apply for a loan is to apply online.
Loans Canada Loan Application
By applying with Loans Canada, you can get matched with the best loan offer and get your loan faster. We created a short personal loan application system to save you time (and money!) when searching for a personal loan.
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You can also follow our guide below to learn how online loan applications work.
Step One: Fill out the online application
Visit the website of the lender you want to apply with and navigate to their application. This process should take no more than 1 to 5 minutes. You will be asked to provide personal information, employment information, and financial information.
Step Two: Compile all your required documents
After submission, you should compile any required documents. This could be bank statements, proof of employment or a government-issued I.D. It’s best to compile everything you may need so that when you’re asked to submit additional information, you’ll be prepared and won’t delay your approval.
Step Three: Monitor your email and answer your phone
This step is particularly important for those looking for quick approval. Once you’ve submitted your application you will need to wait to hear back from the lender. Depending on the lender this could be a call, an email, or even a text message. Monitor these so that you don’t miss any communication from them. It’s important to promptly answer your loan agent and provide them with exactly what they ask for, being helpful will make sure the process goes as smoothly as possible.
Step Four: Wait for approval
Playing the waiting game is never fun, but the good news is that this step shouldn’t take too long. On average you should hear back from a lender within 48 hours. Although it’s important to keep in mind that this does vary from lender to lender. If you’re curious about the status of your loan application, you can always contact the lender.
Step Five: Receive funds
Once approved, you will receive your funds. Depending on the lender, this should take no more than one business day. Most lenders will transfer the money directly to your bank account, but some may provide the option to receive a cheque.
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Loan Requirements: Documents and More
While certain lenders may have additional requirements, here are some of the basic documents and eligibility requirements that most lenders will ask for during the loan application process.
- Steady Income
- Active chequing account
- Age of majority in your province
- Valid Canadian address
- Canadian citizen (or permanent resident)
- Specific credit score requirements
- Social Insurance Number
- Proof of address
- Valid government-issued I.D.
- Proof of employment
- Bank statements
- Co-signer or collateral
Costs Associated With A Loan
When deciding to apply for a loan, it’s important that you calculate all of the costs associated with it. Certain costs, for example, any unexpected fees can affect your ability to repay the loan or can change the amount you’re able to borrow.
Interest rate. All lenders charge interest, it is the main cost of borrowing. Interest rates vary from lender to lender but in Canada, the maximum rate that can be charged is 60%.
Fees. Depending on the type of loan you apply for there is any number of fees you may need to pay. Some of the most common fees are:
- Administration fee
- Loan origination fee
- Brokerage fee
- Non-sufficient funds fee (NSF)
- Late payment fee
- Early repayment fee
All loans will come with some type of fee, but if you’re concerned about a certain fee or feel as though a fee is too high, make sure you’ve read and understood your loan contract before you sign.
Down payment. A down payment is an initial payment you make when purchasing a large asset like a house or a car. It’s typically a percentage of the purchase price of the asset, therefore the down payment you may need to save up for depends on what you’re purchasing.
Monthly payments. Most loans are repaid in installments spread out over the term of the loan. Typically, you’ll be able to choose from monthly, weekly, or bi-weekly payments. Depending on when you receive your paychecks and your budget, you should choose the option that best works for you. Although, it’s important to note that not all lenders will offer all of these options.
Total repayment cost. While you may be able to afford the monthly payments associated with a loan or the interest rate you were offered seems affordable, you should also take into consideration the full cost of the loan at the end of your term. Most lenders will provide you with the final cost of a loan. It’s always a good idea to ask yourself if the full cost is worth it.
Where Should You Get Your Loan From?
Finding the right lender to work with may seem like a stressful task, but once you understand what your options are, you should have no problem making the choice that best fits your unique needs.
Bank or credit union. Probably the most common choice, a bank or credit union is a good option for those consumers who have good credit. Banks and credit unions typically have stricter approval procedures and require borrowers to meet higher standards.
Private lender. A private lender is an individual or company that lends privately as opposed to through a traditional financial institution. Because private lenders do not have the same restrictive requirements, they are able to work with more borrowers. If you have less than great credit or have struggled financially in the past, a private lender could be a great option for you.
Loan broker. Brokers have relationships with multiple lenders and can help you find the best option and rate. One of the main benefits of working with a broker is that you apply with them and they do all the work for you. This means you’ll save time and get the best options that fit your needs.
Online lender. An online lender works directly with borrowers to get them approved for the loans they need. A consumer will fill out the lender’s online application, which is typically quick and easy to accomplish. Once approved they will receive funds directly deposited into their bank account. Online lenders are able to approve more borrowers because they don’t need to follow the same strict approval procedures as banks and credit unions. An online lender is a good option for someone who has struggled financially, who is currently receiving Employment Insurance, or who has poor credit.
Payday loan lender. If you’re currently thinking about applying for a payday loan, we suggest that you consider all other options first. While a payday loan may seem like a great option (easy application and quick approval), more often than not they can cause serious financial issues.
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How to Pay Off Your Loan
Once you’ve received your funds, the next step is to start your repayment plan. Your repayment schedule is set, so you should know what to expect when paying off your loan.
But, it’s important to focus on making sure you can afford to make all your payments as scheduled.
Automatic payments. Most lenders require loan payments to be automatically withdrawn from the borrower’s account. This is a great option as you won’t need to remember to send in your payments and therefore won’t run the risk of missing a payment. But, it’s also important to make sure you always have the funds needed in your account. If your payment bounces, you will be charged a non-sufficient funds fee by your lender and your bank.
Communication. If you know you won’t have the necessary funds in your account for one month you should contact your lender before they try to withdraw the payment. Likely, they will be able to help you out and reschedule the payment, but if you don’t reach out, they might not be as willing to help you after your payment bounces.
Prepayment. Making all your payments on time will keep you on schedule, but there is always the possibility to pay off your loan earlier than scheduled. Some lenders will allow you to make a large one-time payment to pay down your balance quicker. You may also want to discuss with your lender the possibility of paying off the full balance of your loan, keep in mind that depending on how your interest is being calculated, this may not save you any money.
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Getting approved for a loan, regardless of your credit or financial past is easier than ever. We have more options, more lenders, and more ways to apply. And while these advancements are great, unfortunately, now more than ever we need to be wary of the scams and fraudulent lenders that threaten our financial security.
Upfront Payment Loan Scams
The number one most common loan scam currently plaguing Canadian consumers is the upfront payment or loan insurance scam. An individual pretending to be a legitimate lender or even pretending to work for a well-established lender, calls up an unsuspecting consumer and tells them they have been approved for a loan. But, the one catch is that they require an upfront payment, that acts as loan insurance before the money can be deposited into the consumer’s bank account. Typically, the loan insurance payment needs to be provided via a gift card (Steam, Amazon, Visa, etc.) but also they may ask for direct access to your online banking.
No legitimate lender will ever ask a Canadian consumer for an upfront payment of any kind. This is a scam. If you give this person any form of money, they will take it and you will never hear from them again. It’s also important to note that it is almost impossible to catch this type of scammer and you will likely never get your money back.