How to Get a Personal Loan: The Full Guide

Terms for Online Personal Loans in Canada

The terms of a personal loan typically vary between 12 months to 60 months. Amounts can range from $500 to $5,000, on average. Loan interest rates depend on your credit history and score. Therefore, you can still obtain online personal loans for bad credit. Just be forewarned – you will have to pay a higher interest rate. Low interest personal loans are given to borrowers with good to excellent credit.

A Fast and Easy Process

If you apply to direct private lenders for personal loans online, you will discover the process is generally fast and easy.  Apply early in the day and you can have the loan money in your bank account the same day, or, at the latest, the next day. To qualify for funding, you need to show proof of income, provide your credit history, and be at least 18 years of age.

Banks and credit unions require that borrowers have good to excellent credit. Plus, these low interest rate loans take longer to approve. If you want to get a personal loan, regardless of your credit, it is better to apply for a personal loan online.

To get a personal loan, you need to make a good match with a funding source. Small personal loans can be obtained from lenders online or through banks, and credit unions. The agreed loan amount and terms for the financing will enable you to establish a repayment plan monthly. Check if the loan comes with origination fees or if you have to pay a penalty for repaying the debt early.

Making Comparisons

It is important to compare personal loans when you seek financing, as doing so will help you get the best interest rate for your budget. Even if you have bad credit, look for the lowest interest rate for your credit rating. A Canada personal loan for a bad credit borrower is normally provided through a lender who specializes in financing. 

Besides your credit score, the borrower will check your debt-to-income (DTI) ratio to see if you are handling the appropriate amount of debt for what you earn. He or she will also check for missed payments, bankruptcies, and other red flags on your credit report. 

To get the loan, you may need to apply with a co-signer. A co-signer who has a good credit score and a history of making timely payments can greatly boost your chances for approval. He or she only will pay the loan amount back if you cannot repay the financing. In other words, a co-signer covers you back if you fall into default.

Un/Secured Personal Loans

You can ask a personal loan lender about secured and secured personal loans as well. A secured loan is a personal loan that is “secured” with a piece of collateral or an asset. This type of loan is also known as a collateralized loan. 

For example, personal loans, such as car title loans, car loans, home equity loans, and mortgages, all represent online personal loans that are collateralized or secured. Because the loan is attached to an asset, these are normally lower interest rate loans. 

However, most loan interest rates for personal loans run higher, as the majority of personal loan financing is unsecured. In this case, the lender usually charges a higher interest rate because he or she assumes more risk. An unsecured loan is easier to get, as the paperwork is minimal and the funds can be electronically transferred in 24 to 48 hours. 

Repaying the Financing

If you own up to the responsibility of paying back the loan, you can increase your credit score over time, reduce your DTI, and apply for low interest loans later. Even if you have to go through a personal loan bad credit lender, it is not the end of the world. As long as you make your payments each month promptly, you can, in some cases, refinance your loan at a lower interest rate.

What You Need to Get a Personal Loan Online

To get a personal loan online, you need to provide:

• A form of personal identification, such as a social insurance card (S.I.N. card), driver’s license, or passport.
• A confirmed income source, such as two recent pay stubs or an income statement.
• Information about where you work – your company’s name, your employer’s name and position, your work phone, and your email address.
• Proof of your personal address from a utility bill, rental agreement, or mortgage.

The Online Loan Process

Once you have the necessary information to apply for a personal loan, you have to follow several steps: 

1. Determine the amount of the loan

See what you will pay for the principal, fees, and interest. Find out if the lender charges an origination fee or penalizes borrowers for early loan payoffs. Certain charges can drastically affect the lending amount. Therefore, you need to pay special notice to the upfront costs for the loan.

2. Obtain your credit report and scores

In Canada, you can obtain your credit report for free once a year from TransUnion and Equifax. You should always be aware of your credit rating and what is shown on your credit reports. Doing so will give you an edge when applying for low interest rate loans. If you find any inaccuracies on the reports, you will need to dispute them. You can either go through a company that handles disputes or dispute the items yourself. Expect the process to take about 30 days. 

3. Compare personal loans

Whether you have a high or low credit score, you want to ensure you get a good interest rate for your credit rating. If your credit score is not so good, you can still obtain a decent rate of interest by getting a co-signer with a good payment history. Remember, if you take out a secured loan, you can lose your home or car. Therefore, make sure you can repay the loan if you apply for secured financing.

4. Choose from one of the featured personal loans the lender provides

Once you find a reputable lender, you have to decide on the type of personal loan you need. Make sure the lender has a good reputation and excellent online reviews. Take time to scrutinize your choices before choosing a specific type of financing. 

Major Types of Online Personal Loans

Personal loans may represent the following:

• Consolidated loans

  One of the most common personal loan products are consolidated loans. These loans make it simpler for you to handle your credit card debts, as you only need to pay one amount to pay down the obligation. As the name suggests, you will consolidate all your high-interest credit cards into one lower interest rate loan each month.

• Home improvement unsecured and secured personal loans

  If you wish to make a home improvement, you can choose to take out a home equity personal loan or HELOC, both of which are collateralized and tied to your real estate, or a home improvement loan that is unsecured.

• Personal loans that cover unforeseen medical costs

  Some borrowers apply for a personal loan to pay off medical expenses and free themselves of the debt. They pay back the expenses at a lower interest rate.

• Emergency loans

  If your car breaks down or you need to have your plumbing repaired, you may need to do so immediately. You simply cannot wait until you are paid. If you do need this type of loan, you can get it fast, provided you can show proof of income and can supply the necessary documents.

• Wedding Loans

  Getting married, holding a reception, and going on a honeymoon can cost a good deal of money. Therefore, some borrowers prefer to spread the cash they spend over several years. To make this happen, they look for the best personal loan rates in Canada and pay down the debt through financing.

When you compare personal loans online, look for lenders that meet your specific financing requirements. Then check the loan interest rates, hidden costs, or penalties. This is the best way to narrow your choices when you apply for a personal loan online.

5. Review the personal loan interest rates.

When you decide on the purpose for your funding, you can explore the loans and their APRs. You should check the interest rates of 3 to 5 lenders who specialize in online personal loans. If your credit score is poor to fair, your best chance of getting a loan is through the Internet. Otherwise, you might find some good deals on the best personal loan rates Canada lenders provide through banks and credit unions.

6. Ask the lender what type of credit check they plan to run.

To prequalify for a personal loan, it is not necessary to run a hard credit check. Most lenders will run a soft credit check that will not negatively impact your score. Having a soft credit check run will allow you to compare personal loans without the need to commit to a specific loan.

If the lender runs a hard credit check, he or she does not offer prequalification. To lessen this type of effect, review higher or low interest rate loans within a 45-day window of time. That way, they will count as one inquiry toward your credit rating. Compare personal loans in-depth before you apply. Ask if a lender can prequalify you before you apply for financing. 

7. Check if the Interest for the loan is variable or fixed.

Most personal loans are calculated at fixed interest rates, which makes it easy to budget the funding. You know what to expect each month when repaying the loan. However, in some cases, such as refinancing or mortgaging a property, you may pay variable interest rates. 

The variable interest for a loan is usually lower than the fixed option. In this case, the rate may go up or down, depending on the RBC prime rate. If the rate escalates, the payments remain the same, but it takes longer to pay the financing. If the rate goes down, the payments stay the same but the loan term is shorter.

8. Apply for financing

 Once you find a rate that works for you, you can apply for the loan money. Depending on the loan source, you may be able to facilitate the entire process online and receive an instant decision for your Canada funding. 

9. Indicate how much you wish to borrow

You may or may not get the amount for the personal loan you wish. It depends on what the lender feels you can handle, based on your credit rating, income, financial history, and debt-to-income (DTI) ratio. Again, carefully review the loan’s terms, including the repayment period, fees, and interest.

Read the fine print to ensure you understand what exactly you need to pay back. You don’t want any future surprises, especially if you want to build a good credit score.

10. Give the lender the required documentation

To support your personal loan application, you need to include paperwork, such as a copy of your I.D. or a copy of a utility bill to show proof of residence. You probably will need to upload copies of pay stubs, your S.I.N. card, or your driver’s license. Gather the information before applying for the loan to quicken the process.

11. Accept the loan terms by e-signing the loan paperwork

After the lender approves the personal loan, you will need to e-sign the document to show you agree with the payments, fees, and length of the loan term. Once you receive the loan electronically, you can start repayment a month after you receive the money. Make sure you make your payments regularly by setting up automatic payments from your checking account. Some lenders offer discounts for borrowers who choose this option.

Final Thoughts

If you wish to take out a personal loan or check out personal loan interest rates, you have it in your power to do so. Review the small personal loan packages or online personal loans for yourself. The best way to use this type of financing is to pay for what you need when you need it and make sure you can afford to pay back the debt.