When you need an online loan and don’t have the funds, it can leave some of us in a bit of a panic. It can be for many reasons, but when it’s an emergency and you don’t have the funds, GoodCheddar can help to compare your options for online loans in Canada to find a lender.
Online Loans Canada
For those looking to borrow there are several options for online loans in Canada. Since your ability to qualify for a loan typically depends on your credit profile, history, score and similar, this usually determines what your options would be when it comes time to borrow. The type of loan you can get approved for online plays a role in the terms and rates that could be available to you. To put it simply, the higher your credit score, the more likely you might qualify for borrowing terms and rates that are more in your favour.
Bad Credit Loans
Poor credit score
Fair credit score
Good credit score
Personal Loans – to be eligible and qualify for personal loans online, you often require a good to excellent credit score. Personal loans are a type of unsecured loan that are repaid through regularly scheduled installments (payments). They often have a term from 24 to 60 months and their interest rate will vary. To be eligible for a personal loan you will need a good to excellent credit score.
Installment Loans – to qualify for installment loans typically requires a fair to good credit score. Some lenders may accept those with poor to fair at times. An installment loan also has regularly scheduled installments or payments and is considered another type of personal loan. This type of loan usually has a term from 6 to 24 months and their interest rate or APR will vary. An installment loan requires a fair to good credit score.
Payday Loans – this type of loan has the highest interest rates, lowest requirements, and usually the easiest to qualify for. While they don’t have guaranteed approval, it’s close. Applicants with a bad credit score often still find lenders to work with. This should be reserved as a final option after others have been explored. Getting a payday loan is fast and easy for those with fair or poor credit scores, but an expensive way to borrow.
Due to high interest rates, it’s often advised to avoid payday loans if possible. Although if your credit score is below 600 it can be difficult to find other options where a lender might consider your application. While online payday loans are easier to get, the full amount due comes on your next payday. This can create a debt cycle which can be difficult to get out of for some. Whatever loan type that you choose, it’s important to read the loan agreement to review the terms and understand all costs involved before signing an agreement. When the APR is higher than the interest rate it can be a sign that there are additional fees that might be advertised, but must legally appear within the loan agreement. By law, you are allowed to see the terms of a loan before you sign a loan agreement.
Applying for personal loans through banks have become increasingly difficult to qualify and get approved for. Banks may look for a credit score above 660 (often 720+) not declined credit in the last 6 months, haven’t declared bankruptcy in the last 7 years. Where online loan options are often simpler with their requirements, and even though every lender is different, getting approved for online loans is often easier (and faster) than through many banks.
How to Get Loans Online
Applying for loans is often the easy part. It’s what you might qualify or get approved for can be another story. The type of online loan that you could be eligible for has a direct connection to your credit score, and what sort of terms or rates you might be offered. Since most lenders rely on the credit score of Canadians to help determine things like creditworthiness and/or risk, having a good credit score will help getting approved with an online loan application.
While requirements can vary from one lender to the next, some of the most common criteria often includes being a Canadian citizen or resident that’s at least 18 years of age (varies by province), employed and having a bank account and a steady source of verifiable income. Only payday loans don’t usually look at credit scores, since they know most applying for this would be considered to have bad credit. It’s for this reason they use alternative data with instant bank verification (IBV) to review things like debt, income, payments and similar.
Bad Credit Loans Online
When looking for loans online, even having bad credit can be an option with some lenders. Being aware of your credit score and what most lenders consider to be bad credit can help you with finding out what you might qualify for and the most likely interest rate that your loan might charge if you were to consider borrowing. Most people with bad credit seeking online loans are aware that they would have few options and are prepared to pay higher interest rates when they really need the money and don’t have any savings.
If you have a credit score that is over 600, you should probably apply for installment loans since there is a good chance you would be eligible. This type of loan has a longer repayment term, making it more affordable than a payday loan which is due in full by your next payday.
Since online bad credit loans can be more costly to borrow it is important to only request as much as necessary since it is a costly way to borrow. Finding online loans for bad credit is not difficult, but finding the right option can be challenging. There are many lenders that will consider an application for bad credit loans, but depending on your credit score, if the money isn’t needed urgently it can be in your best interest to try and improve your credit score so you might be eligible for a more agreeable interest rate. You might say that you don’t actually choose a loan, but it chooses you, and this would have a lot to do with things like credit score, history, debt to income ratio, other existing loans, your salary and other factors.
Applying for Online Loans
There are a few things you want to consider when looking at online loans:
Loan Amount – how much you request can affect whether you get approved
Interest Rate – also known as cost of borrowing, your credit score can influence the rate
Loan Term – a loan term can impact both the monthly payments and overall interest of the loan
Other Fees – from origination to pre-penalty fees, you will find these in your agreement if any apply
Since having a good credit score has a significant influence towards the rates and terms you might be offered, it’s important to know your score and how it affects your eligibility before you start comparing online loans.
When considering a loan, the term length is an important consideration. If you choose a shorter term, your monthly payments are higher but you’ll pay less in interest. If you choose a longer loan term you can lower your monthly payments, but it can be more difficult to be approved since it increases risk to the lender to get repaid. Your overall credit score can have an effect on the ability to borrow for a longer term, in addition to your credit history being a factor.
A recent study by the Financial Resilience Institute suggests that 78% of Canadians have some level of financial vulnerability. This is often related to a lack of any kind of savings or emergency fund to fall back on when unexpected expenses occur. About a third of Canadians have an emergency fund or financial cushion for such needs, with many living from one paycheque to the next and having trouble getting ahead with their finances.
Finding the Right Online Loan
The following suggestions can help to find your best options when comparing online loans:
– Review the APR (annualized percentage rate) and not just the interest rate
– Check the eligibility requirements since not all lenders are the same
– Look for any other fees or penalties that might be part of the borrowing terms
– Be aware that longer loan terms can mean that it may cost more and you will likely pay more interest
When shopping for online loans, one of the most important things to consider is that it also needs to comfortably fit within your budget and you can afford the monthly payments.
If the funds have an urgent need, there are times you can find eTransfer loan options that will send quickly, often within minutes or hours once approved. An eTransfer is a secure way to receive funds fast that is available in Canada.
If taking out a loan makes your finances ‘uncomfortable’ and monthly payments do not work with your budget and expenses, this would be one of those moments that might require longer loan terms to be considered. While a longer term may have higher borrowing costs in interest over the longer term, having affordable monthly payments that don’t cause stress are also important. You should try to avoid the promise from guaranteed approval lenders with high interest rates since this can create issues for you later.
Interest Rates for Online Loans
Considering that your credit score is often the main deciding factor for what type of interest rate (or loan) you might be eligible for, let’s take a look at how that might be factored into your options.
The following is an estimate to provide an idea of the rates you could qualify for based on your credit rating:
|Credit Score||Rating||Sample Interest Rate|
|300 – 559||Very Poor||30% to 47%|
|560 – 659||Poor||20% to 35%|
|660 – 724||Fair||15% to 35%|
|725 – 759||Good||6% to 15%|
|760 – 900||Excellent||5% to 11%|
A higher score can provide more preferable interest rates when borrowing along with other bonuses, offers and rewards when it comes to personal finance. The average credit score in Canada is about 660, and many banks require a rating of good (720+) or better to qualify.
This is just a couple reasons why online loans continue to grow in popularity in Canada, and due to lending alternatives to banks offering faster options with lower eligibility requirements, online lenders will continue to become popular. It’s becoming more difficult to borrow from banks and online loans provide consumers an option when others will not approve their application. Hopefully the above can help you to avoid mistakes when borrowing and understand some basics that may assist you.