Financial institutions in Canada offer different forms of financing to businesses, individual clients, non-governmental organizations, and other entities. Borrowers in Toronto, banks’ clients in Montreal, customers in Vancouver, and in other places in Canada can choose from a variety of financial products, including mortgage loans, home loans, student loans, business loans, and more.
A mortgage loan is one type of debt instrument that requires borrowers to offer collateral. The collateral is in the form of real estate, and borrowers are obliged to repay the mortgage loan within a specified period and through predetermined set of payments. Mortgage loans are available to business and individual clients who seek to purchase real estate but prefer not to pay or are unable to pay the full value up front. Canadian credit unions, banks, and other financial institutions offer different types of mortgages to their clients in British Columbia, customers in Alberta, borrowers in Ontario, and other locations. Borrowers can choose from first mortgages, adjustable term mortgages, open mortgages, equity mortgages, and others. First mortgages are secured by a first charge on a real estate. In case borrowers default on their mortgage loan, the first lender is the one to have right on the real estate. Open mortgages are another variety and an ideal solution for persons who want to prepay or repay the mortgage loan without penalty. They are typically chosen by borrowers who expect to pay the loan from inheritance or by selling another property. Most financial institutions offer open mortgages with higher interest rates and shorter terms.
Persons who are looking for mortgage financing can check with any of the big banks in Canada. The Bank of Montreal offers BMO mortgage loans to first buyers as well as to persons who seek to purchases their next home. Borrowers are offered low interest rate mortgages as well, with interest rates being lower than those of fixed-rate closed mortgages. Clients of the bank may choose to switch or renew their mortgage loans and buy mortgage insurance.
Another bank to look into is CIBC, offering clients the opportunity to use their home equity, buy their first home, invest in a vacation home, move their mortgage loan to CIBC, or renew their mortgage. Clients of the bank can choose from different CIBC mortgage solutions, including self-employed mortgage, home warranty program, cash back mortgage, and others. The Royal Bank of Canada also offers a variety of mortgage products to its clients in Canada, depending on their requirements. Borrowers can choose from vacation home mortgage, energy saver mortgage, self-employed mortgage, variable or fixed rate mortgage, and other types. Fixed rate mortgages are an ideal solution for borrowers who are concerned with interest rate fluctuations. Variable rate mortgages are featured with low interest rates and are a good choice for clients who want to save money in interest costs. RBC self-employed mortgages are suitable for self-employed persons who seek to renovate, purchase a property, or refinance. Finally, vacation home mortgages are intended for persons who are looking into vacation properties.
A home loan is a type of loan advanced to borrowers who seek to buy real estate, with the loan being secured by the equity in the applicant’s home. When assessing applications for home loans, banks in Canada pay attention to applicants’ salary and age, their credit history and repayment history, savings, debt load, the location of the property to be financed, and the applicant’s profession. Some professions are on a preferred list while others are categorized as risky.
A home equity loan is another debt instrument whereby persons borrow against their home equity. It is a type of consumer loan that is secured by a second mortgage. Basically, home equity loans are like a line of credit. However, borrowers who are unable to service their home equity loans can lose their home to the bank, and it will be sold to repay the outstanding balance. Interest rates on home equity loans are typically adjustable, and they are lower than those on credit cards and second mortgages.
Borrowers who apply for a home equity loan in Canada can improve their chances of getting better terms by boosting their credit score or clubbing income. Borrowers can club income with their spouse, parents, or siblings and apply jointly. They can apply for a long-term loan if a bigger amount is required. Many Canadian financial institutions offer home loans, including CIBC, BMO, and others. The Canadian Imperial Bank of Commerce offers CIBC home equity loans to clients who want to buy a residential or investment property, purchase a big-ticket item, make home renovations, etc. There is no administration fee or service fee, and interest is paid only on the amount borrowed. The Bank of Montreal also offers BMO home equity loans to its clients. Borrowers are given the opportunity to turn their home equity into cash by using collateral. The funds may go toward the purchase of a vacation home, renovation projects, large purchases, and more. Home loans are featured with competitive fixed interest rates, the possibility to defer payments, and a flexible repayment schedule.
The term line of credit refers to an arrangement between a client and a financial establishment, which establishes a maximum balance the client is allowed to maintain. Persons who opt for a line of credit can draw on it whenever required and as long as they do not go over the maximum specified in the loan agreement. Lines of credit offer some advantages over standard loans, and one is that interest is not charged on the full amount, i.e. interest is not charged on the unused part of the credit line. Depending on the financial establishment, lines of credit are sometimes classified as demand loans. In this case, borrowers are required to repay the outstanding balance promptly at the bank’s request.
Most financial establishments in Canada offer lines of credit to their customers. Banks’ clients in Nova Scotia, customers in British Columbia, borrowers in Ontario, or in any other province can apply for a line of credit. RBC Royal Bank, for instance, offers RBC lines of credit that can be used for unplanned expenses and emergencies. Clients can take a secured line of credit or an unsecured one. Credit lines are featured with a variable interest rate that reflects interest rate fluctuations. BMO is another Canadian bank that offers lines of credit with a variable rate of interest. Borrowers are free to repay the full balance without penalty and use the money for whatever they need.
Personal loans are advanced to individual customers and represent consumer loans granted for personal use rather than for commercial use. Personal loans can be secured or unsecured, and the type of loan offered depends on the borrower’s creditworthiness, personal income, amount of debt, and ability to repay the loan. Persons with good credit are usually offered unsecured loans. Secured loans are secured by a guarantor or cosigner or by the asset purchased. The person who cosigns for the borrower is responsible for repayment in case of default. Thus, the cosigner agrees to make payments if the borrower is unable to do so. The major benefit of cosigner loans is that borrowers are offered lower interest rates and in some cases, the options for borrowing are limited unless someone cosigns for them. In any case, repayment usually takes place over an agreed term and through fixed installments.
Personal loans can be used for home improvement projects, purchases, debt consolidation, or anything else the borrower needs. They do not normally involve any fees such as origination fees, application fees, closing costs, or other fees. Personal loans are also short-term loans that assist borrowers with their finances. Interest rates are higher than those of mortgages because the repayment period is shorter. Borrowers who want to obtain a low interest rate may opt for a secured personal loan in case they are homeowners. Here, the borrower’s property will be used as collateral or guarantee for the prompt repayment of the loan.
A personal unsecured loan may be one option for persons who do not own real estate, a house, or other valuable assets to be used as collateral. It is a good choice for borrowers who have limited credit histories and is one alternative to credit cards which carry a higher interest.
Persons who want to apply for a personal loan can check with a variety of financial institutions and their branches in Montreal, offices in Ottawa, Vancouver, Winnipeg, and elsewhere. Clients of CIBC, for example, can opt for a CIBC personal loan and repay it within a set period, making monthly payments. The money can be used to consolidate multiple debts, make an investment, buy furniture, take a vacation, or anything else. Borrowers can take a secured loan by offering some asset or their home as collateral. They are allowed to repay a portion of the loan or the full amount without penalty. Making frequent payments makes it possible to reduce the associated interest costs. Another bank that offers personal loans is the Royal Bank of Canada. RBC personal loans are featured with a variable or fixed rate of interest, diverse payment options, and flexible payment terms.
Bad credit loans are a variation of personal loans, available to persons with less-than-perfect credit and those with limited or no credit history. Bad credit loans are also offered to persons with defaults and arrears, to self-employed persons and in general, to those whose application is rejected elsewhere. Mainstream financial institutions in Canada consider such borrowers high risk and either offer unfavorable terms or outright refuse to advance loans. At the same time, bad credit loans can be beneficial to persons who have experienced foreclosure, repossessions, bankruptcy, and other credit-challenged situations. They can help overburdened borrowers and persons with no credit history to establish or reestablish their credit history.
Bad credit loans are usually offered by financial companies that specialize in lending to borrowers with poor credit. Because of the higher risk they take, lenders offer higher interest rates. Some lenders that provide loans to persons with bad credit also offer debt consolidation services, auto loans, and credit cards to risky borrowers.
Debt consolidation loans allow overburdened borrowers to consolidate credit card debts and other loans into one loan offered with a lower interest rate. While debt consolidation loans can be unsecured, financial institutions in Canada usually offer secured loans and require the provision of collateral. It is precisely the collateral that reduces the risk banks take, making it possible to offer a lower interest rate. Real estate is most commonly used as collateral, and borrowers agree to allow foreclosure or the forced sale of a property as a way to repay the loan. In certain cases, financial companies agree to discount the loan’s amount. This is the situation when a borrower is about to file bankruptcy, and the debt consolidation company buys the loan at a discount.
Debt consolidation is usually recommended to borrowers who are paying credit card debts, along with other high-interest loans. These debts carry a much higher interest than unsecured loans offered by banks. By obtaining a low-interest secured loan borrowers incur less interest and enjoy more manageable payments. Debt consolidation loans are commonly offered by debt consolidation companies, but banks in Canada also offer this type of financial product. RBC Royal Bank, for instance, offers RBC debt consolidation loans that make it possible to conveniently and quickly eliminate debts, saving on interest payments.
Payday loans are a type of short-term financing offered by financial companies in Canada. Unlike debt consolidation loans, they are offered with very high interest rates and fees. Borrowers who resort to such loans usually have poor credit, multiple debts, and low income.
While these loans are unsecured, and borrowers do not risk losing some asset, payday loans are sometimes offered with interest rates of around 600 percent. Most payday loans in Canada are provided for 30 days or even less, and loan amounts are up to $3,000 (this does not apply to first-time borrowers).
Unlike payday loans, Canadian student loans are offered with attractive terms and affordable interest rates. Apart from applying for grants and scholarships, students have two options for obtaining a student loan in Canada – they can apply through the Canada Student Loans Program, or they can look for private student loans from various financial establishments in Canada. RBC Royal Bank, for instance, features government-sponsored student loans, offered to students in Nova Scotia and students in Quebec. The bank assists students with inquiries regarding borrowers’ obligations and responsibilities, tax relief, repayment options, difficulty making repayments, and more.
Car loans or auto loans are another type of personal loan with funds to be used for the purchase of a vehicle. In some cases, it is better to pay cash (if money is available). For example, borrowers who have poor credit may want to pay cash because they will be offered high interest rates. Persons who have enough on hand but are overburdened with multiple debts may want to pay cash as well, or they risk damaging their credit rating even further. Borrowers can apply for a car loan from a variety of establishments including credit unions, banks, and car dealerships. Car loans provided by car dealerships have certain advantages and disadvantages. They are a fast and convenient way to borrow money and purchase a vehicle. At the same time, they are considered high pressure, and car loans may be front-loaded. Banks offer personal services, competitive rates of interest, and there is no sales pitch for add-ons. Some banks also offer free disability insurance and life insurance with car loans. The major disadvantage is that the application process takes more time compared to applying for a car loan from a car dealership.
Business loans are a special category in that they are reserved for businesses only. Business owners can apply for a business loan to establish or expand operations, purchase equipment and machinery, buy commercial real estate, or finance a business project. Canadian businesses have different options when it comes to financing. Small businesses can apply for funds under the Canada Small Business Financing Program (businesses with farming operations do not qualify). As an alternative, businesses can check with some of the Canadian banks and credit unions. RBC Royal Bank, for instance, offers a wide range of leasing and loan options that help businesses choose the right product for them. Business loans are featured with easy credit access and flexible payment schedules and terms. One option is to apply for a term loan, offered in US and Canadian dollars and with variable and fixed interest rates. Term loans are a good solution for businesses that seek to meet their expansion costs. CIBC is another financial institution that offers CIBC business loans to its clients. Borrowers can choose a variable-rate or fixed-rate loan, secured or unsecured loan, and funds in US or Canadian dollars.