3 Different Types of Canadian Personal Loans and How They Work
1. Personal loans (Secured and Unsecured)
Unsecured Personal loans
An unsecured personal loan can be very easy to obtain. Most of the time an unsecured loan requires no collateral and may not even require your credit score. Usually the amount of an unsecured loan is small ranging anywhere from $100 to $500 dollars. Some lenders may require your credit score and those with a low score will usually pay higher interest rates on their loans. Many more lenders are offering unsecured personal loans. You can even apply for a loan online, receiving information on your application almost instantly.
Secured Personal loans
Usually a secured personal loan will have a lower interest rate than that of the unsecured loan. With your personal asset backing the loan as collateral and giving lenders the extra security. Lenders are more likely to give lower interest rates. With both the secured and unsecured personal loans you will have monthly installments to pay back the money. When it comes to the secured loan it is in your best interest to only take what is needed seeing as how your home, car or other asset is being used as collateral. If the loan is not paid back the collateral will be collected in payment to the lender. Also with both the secured and unsecured personal loan the decision on how the money is to be allocated is completely up to the borrower making this loan a very versatile and useful loan if you are short on cash, starting a small business or even making home repairs. The borrower holds the key to this type of loan.
2. Payday Loans
Payday Loans are the possible solution for small financial issues. Every now and then we all find ourselves short on cash, Maybe we found that we don’t have the money to pay a bill or two. A payday loan can help solve the little monetary problems. With most payday loans you can get your money within 24 hours and even have it directly deposited into your bank account. Payday loans should not be used for things that you do not need because they have very high interest rates.
The loan is a cash advance until your next payday. If you do not pay the loan when you receive your next pay check you can extend the loan for a fee. The longer you extend the loan the more money you add to the loan that you will have to pay back to the lender. So if you decide on a payday loan use the money wisely and try to pay the loan of as soon as possible. When you apply for a payday loan you will be asked for personal information, name, phone number, where you work etc. Some lenders like to have copies of your last couple of pay stubs. Take your time when searching for your lender. Some charge higher interest rates than others. If you are in a financial emergency a payday loan can be a quick fix. Just keep in mind the high interest rates and extend fees that come along with this loan.
3. Consolidation Loans
Consolidation loans are made for those who have found themselves in debt. Usually from different types of credit cards. A consolidation loan helps by putting all of your debt payments into one payment. The interest rate on a consolidation loan can be lower than that of the rate on your credit cards, making the payments easier to manage. If you are planning to apply for a consolidation loan watch for lenders who claim that you can pay a fee and automatically be approved. There is no way that a lender could guarantee your approval. Some lenders will however charge an application fee.
When considering a consolidation loan be sure that the payment instalments are reasonable in comparison to your budget, and that you can pay the loan off as arranged. If you are a student trying to consolidate student loans keep in mind that the Canadian government is offering different types of aids and grants to help consolidate student’s loan payments. There are a variety of options for those in debt in Canada through different loan companies. Choose wisely when finding your consolidation loan. Make sure to find one that fits your needs.
Author Bio: Connor is a freelance journalist and in his free time he likes to travel around the world.