If you’re looking for a way to get your hands on some cash, then getting a personal loan in Canada is a great way to go. Canadians are also affected by the economic upheaval caused by the ongoing COVID-19 pandemic. Applying for a loan in Canada may be just what you need to help you with the bills and expenses that you have.
Personal loans are small loans that are taken to pay off financial obligations. It can be a payday loan with small amounts or loans with bigger amounts such as an installment loan. They’re easily accessible for any purpose, from covering school tuition costs to paying for other unexpected expenses like hospital bills. Personal loans are popular because of the flexibility and convenience they provide. If you’re a first-time loan applicant, you should understand how they work. And what does your credit score have to do with getting a personal loan in Canada?
What Are Personal Loans?
Unsecured personal loans don’t require collateral, so they’re perfect for people who are struggling to make ends meet yet cannot provide an asset or guarantor to secure their loan. However, these come with a higher interest rate because loan providers deem a higher risk of non-payment. The different types of unsecured personal loans include credit cards, payday loans, installment loans, and other short-term loans.
When looking for a personal loan, it’s important to shop around as lenders offer different terms and interest rates. People who are looking for a lower interest rate or longer payment term should consider applying for online loans. Different lenders also charge varying fees for their services.
- Many credit card companies also offer personal loans. If you have one from Canadian banks, your credit rating and financial history will still be assessed before being accepted. They want to know if you can make payments on time and not overspend on credit.
- Online lenders are an alternative to banks, credit unions, and traditional lenders. These provide personal loans for people with bad credit. It means that if you haven’t been approved by a regular bank or credit union, an online loan provider may grant you a loan.
- The advantage of using online loan brokers is that you can apply for multiple loans through the Internet, which reduces the application process and saves time. Different types of loans in Canada can be compared and chosen online, depending on the applicant’s needs.
Personal Loans In Canada And Your Credit Score
Your credit score is a three-digit number ranging from 300 to 900. Many lenders use the following factors to determine if you’re a high-risk applicant or not:
- Credit scores are calculated by using the information on your credit report;
- the current amount of debt you owe;
- your payment history;
- and your credit history length
Lenders also look at how long you’ve been employed, the number of times you’ve applied or resigned, your employment history, whether you own or rent your home, and other similar things. What credit score do you need to obtain a loan in Canada?
- In general, if your credit score is between 660 and 724, you have a good credit rating
- Your credit score is considered very good if it’s in the range of 725 to 759;
- You have an excellent credit score when it’s 760 and above.
Credit bureaus like Equifax, Experian, and TransUnion are the main sources of your credit scores. They keep records on file for all of the different credit scores, and they make these reports available to the public. Each year they also release a report that shows what their calculations are based on.
- Because different credit scores will have different effects on different lenders, it’s a good idea to look at the reports of various credit reporting agencies.
- Lenders use different criteria when deciding whether or not to approve a loan, so you may have slightly different credit karma than someone who is highly recommended.
Qualifying For A Personal Loan In Canada Regardless Of Credit Score
It’s easy to qualify for a personal loan in Canada. You just need to meet a few basic criteria, including proof of income and identity. You should be prepared to provide a recent pay stub from your job, bank statements, or other documents showing proof of your income. All of these will show that you’re in a solid financial situation and that you’ll be able to pay back the loan.
- The loan provider will also look at your personal credit rating to offer you the best deal possible. Getting a personal loan in Canada may be easier if you have good credit. Banks are always willing to help people out, and they’re eager to approve a loan request because they know that the money will eventually be returned to them by the borrower.
- If you need a personal loan quickly, but are worried about whether you can get one because of your credit rating, you should consider applying online. Keep in mind, however, that bad credit personal loans have higher interest rates than loans for good credit. The higher fees are designed to compensate the loan provider for the high-risk borrowing.
If you want to get approved for a loan in Canada, then there are several things you can do to improve your credit scores.
- You can pay off any existing debt as quickly as possible to reduce the total amount owed.
- If you have any old balances that you’re not making payments on, you need to consolidate them before you apply for a new mortgage.
- Make sure that your credit cards are paid off and all collection agencies are removed from your credit report. This will help you get a better loan and better mortgage rates.
Takeaway
When looking for a personal loan for bad credit, it’s important to shop around as lenders offer different terms and interest rates. People with bad credit who are looking for a lower interest rate or longer payment term should consider applying from online lenders. The best benefit of obtaining a bad credit loan despite the higher interest rates is that it can help improve your credit score as long as you’re paying your dues on schedule.