If you’ve lost your job in Canada, chances are you’re one of hundreds of thousands of Canadians on Employment Insurance or EI. If you get payments from EI each month and want to take out a loan, you have options. Keep reading to find out more about what types of loans are available and how you can qualify.
What is the Employment Insurance program?
Canada’s Employment Insurance program (or EI for short) is run by the federal government. It was put in place to support Canadians who get laid off from their jobs due to shortage of work or the closure of a business.
So how does it work? You’ve probably noticed that your employer takes an EI premium off every paycheque (which they also match on their end). This money sits in a fund that gets paid out to you if you lose your job.
Compare loans for those on Employment Insurance benefits
How to qualify for employment insurance benefits
The most important factor to qualify is that you get laid off from your job (and aren’t fired for good reason). From there, you’ll need to have worked a required number of hours (between 420 – 700) in the last calendar year. You’ll also need to have made contributions to EI through your pay cheques. If you meet these criteria, you should be eligible to receive 55% of your previous income through the program.
Can I get a loan while on employment insurance benefits?
You can take out a loan while you’re on EI and it won’t impact your benefits. In fact, it could even help you qualify for more money in the long run. This is because it’s generally considered as income and the more income you have, the more lenders are willing to give you.
Your payments from EI can be especially helpful if you don’t have any other sources of income coming in (like disability assistance or the Canada Child Benefit). This is because they can prove to the bank that you have the means to pay back what you borrow, even though you’re in between jobs.
There are a couple of loan options you can consider taking out when you need extra cash.
Secured loans.Secured loans require you to put up some sort of asset (like your house or vehicle) to “insure” your payments. If you default, your lender gets to sell the asset to get their money back.
Unsecured loans.These loans don’t require an asset, but rely heavily on your credit score. If your score is 650 or above, you should be able to qualify for this type of loan. But if you default, your score will go way down.
Guarantor loans. If a friend or family member has a good credit score, you might like to ask them to co-sign for your loan. This way, you should be able to qualify for more money and get more favorable rates.
Check your credit score. The first thing you should do is check your credit score through Equifax or TransUnion. If your credit score is under 650, you may have more trouble getting a loan.
Compare lenders. Use a site like Finder Canada to compare lenders. This could save you thousands of dollars every year on interest rates and fees.
Find out if you’re eligible. Check what the lender’s criteria are for approving your loan. Do you need to have a certain credit score? Are there any minimum income requirements? Only apply for loans you know you can qualify for.
Apply selectively. Apply for loans one at a time. This is because every time a lender does a credit check on your account, your score will go down.
Submit your application. Once you find the right lender for you, fill in an application to get the ball rolling. (You can also click “Go to Site” in the table above to be redirected to a lender’s application page.)
Claire Horwood graduated with a Bachelor of Arts from the University of Victoria, and became a freelance writer in 2017. She has traveled extensively (24 countries and counting) and enjoys working remotely for clients all over the world. In her spare time, Claire loves rock climbing, drinking inordinate amounts of coffee and reading the epic graphic novel series, SAGA.
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