Looking to get a loan? Learn about the process before you apply and make the road to financing easier.
Personal loans can help you buy a new car, renovate your house, get married, consolidate debt and cover a variety of other costs. But what exactly is the process of getting a personal loan? Find out in our guide below.
- Borrow from $5,000
- Free online loan quote
- Quick application process
Motusbank Personal Loan
Apply today to get approved for a personal loan up to $35,000.
- Max. loan amount: $35,000
- Loan term: 1-5 years
- Turnaround time: N/A
- APR: From 5.15%
- Fees: None
- Fixed or variable interest rates
- Available for all Canadian residents excluding Quebec
Step 1: Decide what you need
Finding the right loan starts with you knowing what your current financial circumstances are and what you require in terms of a loan. Say you’re looking to purchase a car. If you have a good credit rating, a secured personal loan might give you a lower annual percentage rate (APR). However, if you have bad credit, you may need to consider getting a cosigner in order to qualify for a more affordable loan. In that case, though, you’ll likely not get such a good APR.
You also need to think about how much you need to borrow, how long you’ll take to repay it and what kind of repayments you can afford. Any additional features you’d like from your loan, such as the ability to repay it early without facing any additional charges, should also be noted.
Lean how to find out what your credit score is
Step 2: Find the right loan type
There are various loan types available: secured loans, unsecured loans, fixed rate and variable rate. There’s also an array of loans for those with bad credit, including payday loans, auto title loans and installment loans. Once you’ve decided what features you need from your loan, have a look at the different loan types and decide which one best suits your needs.
You may also want to compare the maximum loan amounts offered by lenders to be sure you can get the funding you need.
A selection of personal loans you can apply for today
Step 3: See what lenders are offering
Different lenders have varying loan types on offer. For instance, a bank will offer a range of personal loan and credit card products, but is less likely to have solutions for you if your credit score is considered poor. They may simply offer you a much higher APR on loan products. Other lenders may only have products geared toward bad credit borrowers, such as payday and installment loans.
Step 4: Find out about eligibility and APR
This is one of the most important steps to take before applying for any type of loan. Depending on your credit score, some lenders will list a range of APRs on their websites, which means you can browse the choices before the lenders do a hard pull on your credit score. Lenders list basic eligibility criteria that you must meet before you can apply for the loan, which usually include:
- Be 18 years of age, or the age of majority in your province or territory
- Have proof of an income
- Be a Canadian citizen or a permanent resident with a valid Canadian address
- Have a working bank account
Bad credit loans, such as payday loans, come with a standard APR that is offered to all borrowers. Payday loans are regulated by the government in most provinces, so ensure the lender you choose is legitimate and abides by any laws. Some lenders, such as peer-to-peer lenders, let you get an interest rate estimate without it affecting your credit score.
It’s important to know what your credit score is and have a fair idea of what APR you may be eligible for before you apply for a loan.
Step 5: Compare your options
One successful way to find the best personal loan for you is to decide what you need financially and then compare all of your options to make sure you’re getting the most competitive loan terms. Find out the following:
- How much is the lender charging in fees?
- How long will you have to repay the loan?
- Are there any extra fees or charges?
- What other additional features are offered by the lender?
- How does this compare to other similar loans offered by different lenders?
Remember to keep in mind the eligibility criteria of loans and the APR you may be offered before comparing your options.
Step 6: Gather what you need to apply
The information you need to apply will depend on the lender and the type of loan you’re applying for. For most loans, you will need the following:
- A valid government-issued ID
- Proof of address
- Proof of income
- Information regarding your employment
If you’re applying for a secured loan, you’ll need additional documentation regarding the collateral you’re putting up.
Step 7: Submit your application
Once you’ve found the right loan, it’s time to apply. The majority of lenders offer a convenient online application, but you may also be able to apply in person at a branch or over the phone. You usually won’t have to fax over any documents if you apply online, but you should check this before you apply.
Turnaround time for approval and receiving your funds will differ between providers – timeframes fluctuate from a few hours to a few weeks. If your loan is not approved, then you’ll have to look into other options.