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Looking for a Personal Loan? Here Is What You Have To Know 

Personal_Finance / Debt & Loans Nov 10, 2020 - 10:06 AM GMT

By: Submissions


A personal loan is money you borrow for different purposes - to pay bills, for vacation, for purchasing new gadgets, purchasing appliances, paying unexpected bills, or settling your debts. In short, this is the solution to bridging the gap between your needs and the available cash you have on hand. 

Types of personal loans

There are unsecured loans and secured loans. Unsecured loans are not backed by a collateral and are simply based on your creditworthiness. Secured loans, on the other hand, have collaterals so they may come with lower interest rates.

When you get a personal loan, it means you agree to pay the money you borrow in installment terms with interest on top of it. It can be paid in months or even years. It all depends on the agreement or contract you will have with the bank or the loan company. 

Where to get loans

For people residing in Canada, there are different banks and lending companies that offer personal loans. Here are some of them and the loanable amount they offer. 

Loans from Bank vs Private lenders

If you require extra cash, getting a personal loan is one of the very first things you can consider. This is because compared to borrowing money from a friend or a family member wherein you will have to return it on a specific period, getting a personal loan will let you choose when it is convenient for you to pay. Most people think that the only way to get a personal loan is through banks, but that is not always the case. Nowadays, there are so many different lending companies that offer personal loans. 

So, which one is better? Should you get a loan from the bank or get it from a private lending company? To help you decide where to get your personal loan, let us discuss the pros and cons of getting a loan from a bank and getting it from a lending company.

  • Bank loans - There are some things you have to keep in mind if you are thinking of getting a personal loan from a bank. First, they ask for lots of documents and check the borrower’s background. They assess the information thoroughly before approving. Second, banks offer higher loans with lower monthly interest rates and longer installment terms. Banks have regular depositors which means they have easy access to money that they can lend to people who need it. 

  • Alternative or Non-bank lenders - Non-bank lenders like Fairstone have the capital to help cash-strapped individuals or entrepreneurs jumpstarting a business through funds from investors. They provide fast loan solutions, allowing clients to receive the funds they need. Another good thing about non-bank lenders is that it is easier to get approved as most of them do not go over credit history. They also have fewer requirements and conditions. 

Why get a personal loan?

Some people are wary of getting a loan for good reasons. They might be afraid to get one because it could become a burden to them in the future, or they simply do not want to pay interest. But getting a loan can also be a good idea, Here is why.

1. Pay off one or more credit card debts

If you maxed out one or two of your credit cards, paying them all off is a good idea. If you do not have the money to do so, then you can get a loan. Loans typically have lower interest rates, and you pay a fixed amount every month. Just make sure you do not use your credit card again, at least not for a while.

2. To fund a huge purchase

Getting a loan to pay for a purchase in cash is better than paying for it through a high-interest credit card, as long as what you are going to buy is a need and not a want.

3. To pay for a large event, like a wedding

A personal loan for a considerable expense like a wedding will save you a substantial amount on interest charges, given it has a lower rate than your credit card.

Final word

When filing for a personal loan, it is important to know the company you will be dealing with. Most of the time, people tend to choose a bank or company that offers a lower interest rate (as rate comparison between different lenders is important), but what they do not realize is that we must also check the company’s experience and stability, their reputation, upfront fees, and the repayment terms that they offer. 

Given that you will be required to submit personal documents to file a loan, it is crucial to find a trustworthy company. You would not want to give your personal details and important documents to scammers. 

Having flexible repayment terms is also important. Choose a company that is willing to work with you and allows you to set a payment date that works for you.

By S N Chatterjee

Copyright 2020 © S N Chatterjee - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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