Whether you need to finance a large expense on short notice or consolidate debt to avoid paying outrageous interest rates, personal loans can help. It’s preferable to have a health emergency fund for unexpected expenses like a new washing machine or a vehicle, but this isn’t always possible. Here’s what to know if you’re considering taking out a personal loan.
Overview of Personal Loans
Personal loans enable you to borrow money from a bank, credit union, or online lender. These loans can help with consolidating debt, funding a large purchase, or making home improvements. Personal loans typically have a pre-determined term and are repaid in recurring installments. Unsecured loans are most common, meaning you don’t have to put collateral behind them. Loans are awarded based on a borrower’s creditworthiness and proof of income.
Best personal loans in Canada
Bree offers small cash advance loans for amounts up to $200. If you’re looking for extra cash to cover essential expenses, catch up on bills, or avoid overdraft or late payment fees, Bree can help. Bree doesn’t charge interest and has zero mandatory fees. You’ll have access to cash within a few days, but for a small fee, you can receive cash in minutes. Bree also offers a budgeting tool to help you plan future expenses to avoid cash shortages and unnecessary fees.
2. Spring Financial
Spring Financial offers same-day personal loans from $500 to $35,000. They have an online application, and approved borrowers will receive their funds by e-transfer within the day, making them one of the best loan providers for those needing fast cash. Spring Financial works with borrowers with bad or poor credit, but interest rates may be high for these applicants. They offer bi-weekly or monthly repayment terms.
Fairstone offers secured and unsecured personal loans of between $500 and $50,000. You can use their free online quote system to determine your eligibility and then connect with a loan advisor to complete your application. They offer flexible repayment terms with options for weekly, bi-weekly, monthly, or semi-monthly payments.
4. Loans Canada
Loans Canada is a loan aggregator that compiles personal loan providers to help applicants compare options and select the ideal lender. After filling out a single application, Loans Canada will match you with quotes from multiple providers so you can shop around for the optimal loan terms. You can borrow up to $50,000 and choose from various repayment terms and interest rates.
5. SkyCap Financial
SkyCap Financial enables you to borrow up to $10,000 with terms of up to 5 years. SkyCap is an alternative lender that strives to offer financing to all borrowers, even those with bad credit. They make decisions based on your overall financial situation, not just your credit history. You can apply online and receive a decision within minutes. They offer flexible payment schedules and give borrowers access to SkyCap University, where they can learn about managing personal finances to secure a better financial future.
Borrowell is a loan aggregator that helps match applicants with multiple lenders who are most likely to approve their personal loan applications. They have over 50 financial partners across Canada, making it easy to locate lenders for any financial profile. Borrowell enables you to pre-qualify for a personal loan through a soft credit check to protect your credit score. They also have a free credit score alert system to help you monitor your credit profile. With Borrowell, you can borrow up to $10,000 and receive your funds within a few days. Loan terms range from 36 to 60 months, and repayment terms vary depending on your chosen lender.
Mogo offers personal loans for borrowers with good or bad credit. You can pre-qualify on their website to receive a no-obligation quote without hurting your credit score. Then, if you agree to the loan terms, you can submit a formal loan application. With Mogo, you can borrow up to $35,000. They offer a 100-day trial period to test your loan. If you’re unsatisfied with the experience, you can repay the principal and have all fees and interest returned to you. Borrowers who routinely make on-time payments can qualify for perks like higher loan amounts.
Vancity is a Canadian credit union that offers personal loans between $5,000 and $50,000. Loan terms vary depending on your income and credit score. Like most credit unions, Vancity offers very competitive interest rates, making them an appealing lender. The downside to Vancity is that they only work with residents of BC. It also may be hard to qualify for a Vancity loan if you have poor or bad credit.
Easyfinancial is an alternative lender that works with individuals who can’t always secure a loan through a bank. They offer personal loans between $500 and $20,000 and work with borrowers with good to bad credit and even those with no credit history. They offer loan terms between 9 and 84 months. Once approved, borrowers will receive loan funds within a few hours via e-Transfer.
10. National Bank
National Bank is one of Canada’s major banks, offering fixed and variable rate personal loans to qualified borrowers. As an established institution, National Bank can offer lower interest rates, starting at 9.56%. But, they are also more strict about application requirements and less likely to work with borrowers with fair or poor credit.
Factors to Consider when Searching for the Best Personal Loans in Canada
Before you take out a personal loan, it’s crucial to analyze how your payments will fit into your overall budget. The loan quantity isn’t the only deciding factor when choosing a lender. More money isn’t always better. Shopping around for a loan provider can help you find the best personal loan for your needs. Here’s what to consider as you look for a personal loan.
Interest Rates and Fees
Personal loan interest rates and fees can dramatically increase the cost of borrowing money. Interest rates vary from one lender to the next, but they’re also dependent on your credit score, credit history, and income. Having a stronger score and spotless credit history will help you secure more favourable rates. Knowing this, do whatever you can to boost your score before you apply for a personal loan.
Be mindful of any fees associated with your loan. Personal loans may have:
- Origination fees
- Prepayment fees
- Late payment fees
- Application fees
- And more
Each of these adds to the overall cost of your loan, so they should be avoided whenever possible. Review each loan offer carefully to ensure you’re clear on the fees that come with your loan.
Before applying for a loan, you should have an ideal loan amount in mind. How much money do you really need to borrow, and how much can you comfortably allocate to loan payments each month? These factors are more important than securing the largest loan possible. Before applying for a loan, set a budget for whatever it is that you’re financing, whether it’s a new washer and dryer, a home renovation, debt consolidation, or a wedding, setting a budget cap will ensure repaying the loan is manageable.
A repayment term is the amount of time you have to repay the balance of your personal loan. These may vary from a few months to several years. Extending the repayment term lowers your monthly payments but increases the interest you’ll pay on your loan, making it more costly overall. Ideally, you’ll select the shortest repayment term manageable to avoid paying excess interest. However, it’s also crucial that your monthly payments are low enough that you can make them on time every month without causing undue stress or financial strain.
Where to Find the Best Personal Loans
There are many different types of personal loan providers in Canada, each with pros and cons. Borrowers looking for bad credit loans may have better chances of approval with alternative lenders online, while those with strong credit looking to minimize interest rates and secure a larger loan may have better luck with a traditional bank. It’s wise to compare various options to find the best rates. An aggregator like Borrowell or Loans Canada can help you peruse loan offers from various lenders before deciding.
Online lenders typically have an efficient application process, enabling you to receive an answer in minutes. There are many online lenders, such as Bree, offering affordable alternatives to payday loans or bad credit loans. Online, alternative lenders often have more flexible application requirements, making them more accessible to borrowers with less than stellar credit. However, many of them have higher interest rates as a result.
Credit unions are notorious for offering low interest rates on their personal loans and for having more flexible repayment terms. However, usually, you must become a member of the credit union to apply for a loan. Credit unions are often more willing to work with borrowers with bad credit than a traditional bank.
Banks are the most traditional lenders of the bunch. Because they are very established, they can often offer the most competitive loans and the best interest rates. They often offer larger loans than other types of lenders, too. However, banks are notoriously unforgiving when it comes to borrowing money with bad credit.
Advantages and Disadvantages of Personal Loans
Any time you borrow money, there will be pros and cons. Here’s what to consider before you take out a personal loan.
A personal loan can give you access to extra cash in a relatively short period. They often have lower interest rates than consumer debt (credit cards), so they can be an affordable way to finance large purchases or enable you to consolidate debt at more competitive interest rates. Personal loans often have flexible repayment terms, allowing you to opt for comfortable monthly payments.
You will pay interest on any money you borrow, so it’s better to avoid taking on more debt than necessary. Missing a loan payment could harm your credit score and lead to financial strain. There are often fees associated with personal loans, making the cost of borrowing high. Depending on your financial situation, it could be tough to meet the eligibility requirements for personal loans.
Ultimately, if you need money quickly, a personal loan can be a convenient way to get your hands on extra cash. Personal loans diversify your credit mix, and paying them on time will help boost your score. This doesn’t mean you should take on unnecessary debt, though. Just know that responsibly managing debt will help improve your credit. Always review the loan terms carefully to ensure you’re aware of interest rates and fees.