There are times when you need to pay for a large expense but don’t have the money saved up. A personal loan can help you cover many costs, from repairing your car to financing your wedding. We guide you through the entire loan application process below and provide pictures to help you along the way.
Most personal loan applications are fairly straightforward, but to make the process simple and quick, you’ll need to have all the necessary information on hand. Here’s what most lenders require:
Credit Rating: Varies, but the lowest average score is usually 650.
Annual Income: Typically $20,000 or more.
Credit History: You will usually need a credit history, sometimes of several years, in order to qualify.
Debt-to-income ratio: Most lenders prefer a debt-to-income ratio of 43% or less, not including your mortgage.
You must have a working bank account.
Be 18 years of age, or the age of majority in your province or territory.
Be a citizen or permanent resident of Canada with a valid Canadian address.
Have a regular source of income.
Meet any credit and income requirements.
Personal details. Your full name, date of birth and valid government-issued ID.
Contact details. Your address, phone number and email.
Employer’s name, address and the length of your employment.
Bank account details. Your bank’s name, address and transit number, as well as your own personal bank account number.
Before you apply
Before you begin the loan process, you will need to decide whether you’re going to apply for a secured loan or an unsecured loan.
Unsecured loans do not require any collateral to secure the loan, meaning your credit score is usually one of the biggest factors lenders use to gauge your eligibility and APR.
Secured loans require providing an asset as collateral, such as your home equity or your car. You can usually get a lower interest rate since you’re providing collateral, however if you don’t make your repayments the lender can seize your asset.
Decide how much money you need
The amount you borrow should be based on the expense you’re trying to cover and your income. It’s better to determine how much you can spend each month on repayments and borrow less than your maximum so you can avoid stretching your budget too tight.
Taking out a loan that’s too small can leave you with remaining financial needs, but if you take out a loan that’s too large, your loan will be unnecessarily expensive. This is why you should carefully calculate the debt you can handle and the amount you actually need before you apply.
Check your credit
Your credit history will determine how much you qualify to borrow. Most lenders will require good credit scores and a multi-year history before they offer you an unsecured loan, but there are personal loans for people with poor credit. Before you apply, check your credit score so you know what type of loan you qualify for.
Find the right loan
Before you apply for a loan, be sure to compare different lenders. Check interest rates, fees, loan terms and payment options before signing any documents.
Need more info? Our guide to personal loans will help you make an informed decision. You may also want to visit your local bank or credit union to find out what kind of rates and terms they offer. The processing times for banks and credit unions tend to be higher than online loans, but you may receive a more favourable interest rate.
After comparing loans, navigate to the website of the lender you want to apply with and find the secure loan application page. Fill out the basic information, such as your name and contact information.
As you continue, you’ll be prompted to fill out more pages detailing your personal and financial information.
Next you’ll input the loan information. This will be the amount you want to borrow and how long you’ll need to pay it back. Remember, the shorter the loan, the less you pay in interest and the cheaper your loan is.
Once everything is filled out, verify that the information is correct and hit submit. You’ll usually be notified with a decision on your loan application within a few minutes. If you’re approved, your lender will likely contact you to confirm your information, and most people receive their loan funds as soon as one business day after approval. However, some lenders take longer to disburse the funds.
What happens next?
The application process may vary slightly between lenders, but generally they all follow a format similar to the one above.
Receiving your loan.
Many lenders and banks require that you have a working bank account to receive your loan via direct deposit, but that’s not always the only option. Some lenders will be able to send you a cheque or load your money onto a prepaid debit card. If this is important to you, ask your lender how they transfer funds.
Time to spend it.
If you took out a loan for something specific, such as an auto loan or a debt consolidation loan, you should spend it on that. However, you are free to spend your loan funds on whatever you’d like, as long as it’s a legitimate purpose.
Make your repayments on time.
It’s very important to make your repayments on time so you don’t end up paying extra in fees or hurting your credit score. Be sure to verify how you’ll need to make repayments. Can you pay by phone, online through the lender’s website or do you need to mail in a cheque? Is there an automatic payment option? These choices will impact which lender you choose and how you’ll pay off your debt.
Find a personal loan
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Frequently asked questions about applying for loans
There are many types of loans available. Some of the ones you can find include: student, home-improvement, green, adoption, pet, vacation, wedding and car loans.
Aliyyah Camp is a publisher helping folks compare personal, student, car and business loans. Prior to joining Finder, she ran her own personal finance blog and wrote for numerous finance sites. Aliyyah earned a BA in communication from the University of Pennsylvania. She likes to go to the movies and go for runs outdoors.
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