Personal loans from banks
Banks can offer safe and secure borrowing solutions with a familiar experience.
With the vast number of lenders on the market today, it’s easy to become overwhelmed when searching for the right personal loan. You want a loan that offers both safety and convenience, and you want the confidence that comes with knowing you’ve got the best rate and terms you’re eligible for.
A personal loan from a bank could offer you some of the features you need — like the convenience of already having a banking history and relationship with them.
Bank loans don’t differ much from personal loans offered by other lenders. The main advantages of taking out a personal loan from your bank include:
- Banks usually offer competitive interest rates, if you have good or excellent credit.
- If you’re an existing customer, you can easily apply for a loan online, in-person or over the phone.
- As an existing customer, you can manage all your finances in one place.
- Your bank may be able to use your bank account activity to verify your income and expenses, perhaps requiring less documentation when applying for your loan.
- Banks sometimes offer perks — like fee reductions — for bundling multiple financial products together.
Banks offer a wide range of loan products to meet most borrowing needs and a variety of financial situations. Here are just a few of the loan products you can expect to find at a bank:
- Secured personal loan. Typically used to finance a car or other large purchase, secured loans use that new purchase as collateral. This security lessens the risk of default for the lender: If you can’t make repayments, they can simply take your newly purchased asset as payment. This decreased risk generally results in lower interest rates and fees, but you’re typically required to use the entire loan amount solely to finance the specified asset.
- Unsecured personal loan. Unsecured loans offer more flexibility in use than a secured loan and don’t require you to put up any collateral. Since unsecured loans are riskier for lenders, they typically have higher rates and fees. Banks also usually impose stricter eligibility criteria for an unsecured loan.
- Line of credit. With a line of credit, you are able to withdraw a set amount of funds as you need to. The main difference between a line of credit and a term loan is that you have ongoing access to a credit limit without a cutoff date. Usually, you do not pay any rates or fees on this service until you use it and the rates are only charged on the amount of money you actually withdraw, rather than the total amount available.
- Debt consolidation loan. If you have a few separate loans or credit accounts — anything from credit card debt to a car loan — you might want to consolidate this debt into one loan. With a debt consolidation loan, you can pay off your other loans and combine your debt into one single loan, where you’ll only have to make one repayment. Another goal with debt consolidation is to try and secure lower rates and fees, so you pay less over the course of your loan.
- The convenience of keeping your loan and other financial products in one place.
- Banks may offer more advanced and flexible features over other smaller lenders.
- If you have a current banking relationship, you could expedite the approval process.
- Interest rates and fees can be less competitive than with other lenders.
- Strict eligibility criteria could limit people with poor or short credit history.
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Before heading to your bank to apply for a personal loan, consider the following:
- Compare loans offered by your bank to the offerings of other lenders, including credit unions and online lenders. This will ensure you get the best loan for your situation, with competitive rates and favourable terms.
- A personal loan may not be right for you. Compare different types of loans on the market to find one that’s compatible with your financial needs.
- If you don’t think you’ll be able to make your loan repayments, avoid taking out a loan in the first place. There may be better alternative methods of financing available to you, such as borrowing money from friends or family.
Once you’ve compared lenders and loan options and found the right one for you, navigate to the bank’s website and choose the loan you’d like to apply for. You’ll have to log in or set up an account if you’re not already an existing customer.
The details you’re required to submit as part of the application process will depend on the lender you choose. However, lenders generally require:
- Personal details including contact information.
- Financial details that include your income, assets and debts.
- Employment information including your place of work and the contact information.
To get a personal loan, you’ll also usually need to meet the following requirements:
- Be 18 years of age or the age of majority in your province or territory.
- Be a Canadian citizen or a permanent resident with a valid Canadian address.
- Have a steady source of income.
- Have a working bank account.
- Meet any credit score or income requirements.