A personal loan is a term that denotes a loan, which is advanced based on the borrower’s creditworthiness and ability to repay. It establishes consumer credit and is a way of borrowing from a financial service provider such as a credit union, bank, financial company, or another establishment. Personal loans are granted for personal use, and the funds can go toward meeting daily expenses, going on vacation, the purchase of a vehicle, or anything else. Personal loans are usually unsecured, and the provision of collateral is not required.
Personal loans are extended to individual borrowers, and the amount advanced depends on a variety of factors. These include the applicant’s payment history, credit history, monthly overheads, salary, additional income, and others. Generally, personal loans are not difficult to obtain if the borrower has good credit and is not in the market for a large amount of money. This is because personal loans are unsecured. When applying for a loan, borrowers are asked to present a photo ID or their driver’s license to be used to pull their credit report. This way, financial institutions can check the borrower’s credit score and previous payment history. Financial institutions also look at the borrower’s employment information and request proof that the applicant is currently employed. Applicants have to provide two or more recent pay stubs. This is important as to assess the borrower’s debt-to-income ratio. Financial institutions combine the new payments with existing debts and calculate them against the applicant’s income to determine his/her ability to repay. Banks also look at the borrower’s bank activity and bank information to verify that the applicant is making regular payments to his/her creditors. They pay attention to overdrafts to find out whether the applicant is in the habit of overdrawing before payday.
Personal loans are offered to borrowers throughout Canada – to clients in Calgary and Vancouver, borrowers in Halifax and Winnipeg, customers in Toronto and Edmonton, and elsewhere. These loans are beneficial in many ways, and a major advantage is that borrowers gain access to money when they need it most. Second, borrowers with poor credit and those with no credit history can improve their credit standing or establish credit by making regular payments. A good or excellent credit score will then make it easier to obtain attractive terms and rates on various financial products, including mortgages, credit cards, auto loans, etc. Third, personal loans are offered with lower interest rates than credit cards and payday loans meaning that borrowers pay less in interest charges. Finally, personal loans are repaid in installments which makes them more affordable compared to other loans. Payday loans, for example, are paid off in the form of a one time payment. Personal loans are also a preferred financial product and are more popular than overdrafts and credit cards because they give access to a larger amount of money. They can be used for expensive purchases for which immediate payment is required. Borrowers can spread the purchase’s cost over a specified period and thus, they can manage their finances better in the short term. This is especially the case if the loan is offered with a fixed interest rate.
Given the high level of competition among Canadian financial institutions, borrowers are usually able to negotiate lower interest rates than what they were initially quoted. It also pays to look around and find a specialist lender that offers financial products tailored to one’s specific requirements.
Personal loans have some disadvantages as well. Borrowers who cannot afford to repay the loan may face a penalty, and their credit score is likely to suffer. This will limit their access to credit and their options for borrowing in the future. Some financial institutions impose penalties for making prepayments as well. Some of the lenders allow borrowers to prepay, but they are usually charged an early repayment fee.
Using a credit card may be more reasonable for borrowers who only need a small amount of money and can repay it within a short period. This is a more sensible solution because cardholders are allowed to pay off the full balance at any time. This does not incur early repayment fees. Overdrafts are another option for persons who need a small amount of money, say, in an emergency. The downside of using credit cards and overdrafts is that the interest rate is typically much higher. These are not designed as instruments for long-term borrowing.
Bad credit personal loans are a variation of personal loans and intended for persons who have little exposure to credit or a compromised credit score. There are many ways in which a person can be classified as having poor credit, but it usually means that the borrower was unable to meet the terms of one or more past credit agreements. The borrower may have exceeded the credit limit on his credit card, missed loan payments, defaulted on a mortgage loan, etc. When any of these happens, it is recorded on the borrower’s credit record or profile. In essence, persons who have an undisturbed and long-standing history of credit are classified as prime borrowers. They have had a variety of credit agreements (unsecured and secured), the terms of which have been met. The lending industry views such borrowers as being creditworthy and reliable, and they have little trouble getting approved for any type of loan. The situation is similar with near prime borrowers who have had minimal credit problems. Subprime borrowers, on the other hand, are unable to prove reliability and are classified as risky borrowers. Subprime borrowers are the recipients of bad credit personal loans in Canada.
There are Canadian lenders that specialize in bad credit loans and serve this particular niche. Such borrowers are usually unsatisfactory candidates for standard types of financing. The recipients of bad credit personal loans usually experience financial problems due to family emergencies, poor financial management, redundancies, divorce, and other hardships. Lenders that specialize and work in this niche extend loans to persons is such dire situations. In many cases, loans are offered with extremely high interest rates and unfavorable conditions. However, bad credit personal loans may be a good choice for persons who have no other alternative and are in need of money.
One beneficial feature of bad credit personal loans is that they are easy to obtain. Financial companies that advertise this type of loans do not require a credit check, collateral, or faxing of any documents. Canadian borrowers who apply for a bad credit personal loan are asked to provide proof of income, including letter from their employer and two recent pay stubs, along with their driver’s license, health card, or another photo ID.
There are different types of bad credit personal loans, and the requirements for them differ. Borrowers can apply for a bad credit auto loan, a boat loan with bad credit, a bad credit home loan, or another type of loan. With regard to qualifying criteria, borrowers who want to obtain a bad credit car title loan, for example, have to make sure the vehicle is insured, including comprehensive and collision coverage. The vehicle should be less than eight years old, and the borrower has to provide proof of ownership. Canadian lenders also require that applicants present a photo of the car’s odometer, photos of the interior and exterior of the car, references (up to five in some cases), and a void check. In addition, borrowers should present proof of residence (tax bill, mortgage, or rental agreement) and proof of income.
One alternative to unsecured bad credit loans are secured loans, which are available to homeowners in Canada. Using one’s home as collateral can lower the interest rate and hence, the cost of the loan. Secured loans give lenders piece of mind because if borrowers refuse to repay the outstanding balance or are unable to do so, lenders can reclaim the property used as collateral. The money goes toward covering the outstanding balance. The applicant’s credit standing becomes less important and less relevant because of the collateral, and the financial institution may offer a more competitive interest rate.
Financial institutions that offer unsecured personal loans do not require that applicants offer some valuable asset (car, real estate, or expensive jewelry) as collateral. Unsecured debt is intended for small purchases and is offered in the form of personal or signature loans. Borrowers usually use unsecured loans to meet unexpected expenses, go on vacation, make home improvements, or make purchases such as electronics or computers.
With unsecured personal loans, financial institutions rely on the promise of borrowers to repay the loaned amount. Some lenders assess penalties for early repayment, and the loan balance is evenly distributed across a set of payments. Some unsecured loans are offered with a fixed rate of interest, and this is when the loan is due at the end of a specified term. Other loans work as revolving credit lines and are featured with variable interest rates. Unsecured loans tend to be less flexible than secured ones. However, they are a good solution for persons who seek a short-term loan to be repaid faster. Repayment periods usually range from 1 to five years. While interest rates are higher than those on secured personal loans, they are lower than the interest rates offered with payday loans, credit cards, and other financial products. Home equity loans and mortgages come with a lower interest rate than personal loans. Still, borrowers who do not have real estate to offer as collateral benefit from obtaining an unsecured personal loan.
Borrowers who are looking for unsecured personal loans can apply with financial companies, credit unions, caisses populaires, banks, and other financial establishments. Many banks allow clients to apply for loans online and advertise convenient and fast application process. Unsecured personal loans are offered by many Canadian lenders, and borrowers can apply for a CIBC unsecured loan, RBC personal loan, or a loan from any other reputable financial institution. CIBC, for example, offers unsecured personal loans to its clients in Vancouver, borrowers in Edmonton, customers in Winnipeg, and elsewhere in the country. The bank offers CIBC unsecured personal loans to borrowers who seek to make an investment, buy furniture, renovate, or go on vacation. Borrowers are allowed to pay the outstanding balance or part of it without penalty and at any time. CIBC encourages clients to apply online which guarantees them faster approval. Optional features offered with unsecured personal loans include payment protector insurance, disability insurance, as well as life insurance. Borrowers who want to apply for an unsecured personal loan should have reached the age of majority and must be Canadian residents. There is a minimum income requirement and borrowers who have been in bankruptcy within the past seven years do not qualify. Other conditions and limitations may apply.
BMO is another bank that offers personal loans to its clients. The Bank of Montreal unsecured personal loans are a good solution for any type of need. Borrowers enjoy fixed payments and a flexible repayment schedule, along with the possibility to make additional payments. Fixed rate and variable rate personal loans are offered. Borrowers who choose a fixed interest rate get added protection against interest rate fluctuations. Borrowers can buy optional disability insurance or creditor life insurance. To apply for a BMO personal loan, borrowers should have certain information and documentation on hand. This includes rent or housing expenses, monthly income (salary, wages, and additional income), and the monthly payments and outstanding balances of loans, mortgage loans, lines of credit and credit cards. Borrowers should have the value of their properties, vehicles, savings, and investments, if any. If applying together with a joint applicant, borrowers have to present their financial information as well. Applications for BMO unsecured personal loans are usually processed within two business days.
Clients of TD Bank can apply for TD unsecured personal loans through its branches in Toronto, offices in Ottawa, branches in Winnipeg, and elsewhere. The bank offers fixed rate loans which allow borrowers to lock in the interest rate over the loan’s term. Borrowers who choose this option are protected against increases in interest rates. Variable rate loans are another option for persons who want to benefit from periods when the interest rate is low. While the monthly payments do not change, more of the borrower’s payment goes toward paying the principal when interest rates go down. This means that the borrower is able to repay the loan faster. Borrowers are also allowed to convert their variable rate loan (the outstanding balance) to a fixed rate loan when interest rates go up. In addition, clients can choose from a variety of repayment schedules so that payments are affordable and fit their budget. Those who choose a longer term benefit from making lower payments.
Personal loans offered by TD Bank are a good solution for clients who want to finance a renewable energy product. Borrowers can opt for disability insurance or loan life insurance as a way to protect their loan obligations. No medical examination is necessary, and no health questions are asked.
Clients of the Bank of Nova Scotia can apply for an unsecured personal loan as well, visiting its Ontario branches, British Columbia branches, Alberta offices, and elsewhere in Canada. Borrowers benefit from consistent monthly payments which allow them to manage their finances. Scotiabank unsecured personal loans allow payment flexibility in that borrowers can repay the outstanding balance at any time. No prepayment penalty applies. Applicants can choose from an unsecured personal loan and a secured loan, and both types are offered with a fixed interest rate. Personal loans are offered with flexible repayment schedules that fit borrowers’ budget and timeline. Applying for a personal loan is easy, and borrowers are asked to make an appointment at a branch of their choice.
Banks are not the only place to shop around for unsecured personal loans. Members of credit unions can check with their local branch as well. Meridian, for example, offers unsecured personal loans with flexible repayment schedules, variable or fixed rate of interest, and blended repayment, which allows customers to pay down the loan faster. Meridian serves customers in Toronto and other locations. Vancity is another credit union that offers personal loans to its members. Customers enjoy preferential rates on energy-saving home renovations, fuel-efficient automobiles, and other projects that help save the environment. Union members can apply for different types of loans, including personal computer loans and loans to make energy-saving renovations and fight climate change. Borrowers can improve the resale value of their homes with an energy efficiency rating which proves potential buyers that the house is energy efficient. Another type of loan to apply for is the personal computer loan. Customers enjoy special interest rates and easy application process. They are asked to bring a copy of their invoice with them as to verify their computer upgrade or purchase. The loan proceeds are paid to borrowers through direct deposit or by check. Finally, borrowers who get approved for a personal loan are allowed to make payments more frequently as a way to save on interest charges. Customers are also offered flexible repayment schedules to match their pay period.