A personal loan is a convenient borrowing solution especially if you are working to consolidate your debts and rebuild your credit score. A personal loan attracts lower interest rate, is flexible, and is often tailored to meet your needs. So, how does a personal loan work?
Overview of a personal loan
A personal loan is a credit facility with fixed repayment duration. Additionally, a borrower has the liberty to choose between a variable or fixed interest rate when applying for the loan. This makes them attractive over credit cards and even most other loan facilities.
Types of Personal Loans in Canada
Secured personal loans
These are backed by collateral such as a house or a car. The lender holds the title or deed until the borrower clears their loan obligation. Examples of secured loans include mortgage, Auto loan, boat loans and recreational vehicle loans.
Unsecured personal loans
These loans aren’t tied to any collateral and, as such, a lender cannot confiscate any of your property in case you fail to meet your loan obligations. Lenders will only extend an unsecured loan to you if you have a good credit history and a disposable income to repay the loan. To browse a vast list of personal loan providers in Canada, visit Smarter Loans. Student loans and credit card purchases are perfect examples of unsecured loans.
Tips to Qualify for Canadian Personal Loans
- You must be eighteen years (or nineteen years in some Canadian states) or older to be considered for personal loans.
- Personal loans range between $500 and $35,000with the highest amounts determined basing on your credit history or income.
- You must be a Canadian citizen to be considered for personal loans. During the loan application process, you will be requested to furnish your lender with personal details as well as your gross annual income. You must also consent to the lender’s access to your credit history.
- You must agree to thoroughly review the Customer Information provided by your lender. This serves as an assurance that you actually understand what you are signing for.
- If you are seeking the loan facility as partnership, your co-applicant is also under obligation to complete the application process.
Applying for a personal loan
If you’ve met the prerequisites of qualifying for a personal loan, the next step is to follow procedure outlined below;
- Fill out an application form
- Avail the necessary details to the lender
- Allow your lender to access your income-to-debt reports
- Be ready to furnish the lender with any other relevant details regarding the loan
Merits of a personal loan
Repayment schedule is flexible
You can repay the loan facility in a flexible way as lenders allow you to adjust the repayment schedule to fit your budget. Personal loans are actually repayable in a maximum of five years.
You can choose between fixed and variable interest rate
If you choose a fixed rate, you will pay a constant amount of predetermined interest until you pay up the whole sum of your loan amount.
Can borrow up to $35,000
Depending on credit reports and current income, you can qualify for up to $35,000 in personal loans. Some lenders will even extend higher amounts on evaluating your repayment capability.
The funds can be released upfront
If you need some credit for your investments, renovations, and unexpected expenses, personal loans is the best credit option as a portion of funds can be released upfront as you await for the rest to be cleared.
The popularity of personal loans continues to surge amongst Canadians as they are flexible, affordable, and easily accessible compared to some other forms of credit. Familiarizing yourself with how personal loans work is definitely the first step to deriving maximum benefits from the loan.