Nonbank personal loans
Find out where to get a personal loan from a lender other than your bank — and what benefits it could bring.
When your bank doesn’t offer the loan you need — or your bank denies your loan application — it’s worth considering a loan from a financial institution or lender that’s not a bank. These nonbank lenders include independent or private lenders and credit unions who, thanks to their smaller sizes, may provide more personalized services to help with your personal loan.
A nonbank lender offers loans without the traditional features of a bank. There are a couple of different types of nonbank lenders, including credit unions and online lenders.
- Credit unions are similar to banks, but often offer more personalized services due to limited regional availability. Credit unions vary between provinces and territories and you’ll need to become a member of a specific credit union in order to apply for and receive a loan. These financial institutions are member-owned nonprofits, meaning any profits earned are put directly back into the products and services on offer. Credit unions typically offer standard financial products that include bank accounts, savings accounts and personal loans.
- Online lenders, on the other hand, usually don’t have physical stores. The application, approval and repayment processes are usually all completely online. You will typically receive your money directly into your bank account and make your repayments online. If you’re looking to purchase a specific product or service, you can often find lenders who specialize in the loans they offer. Online lender’s specialities include car loans, medical loans, dental loans and many others.
Personal loans from an independent lender typically offer the same, and sometimes more, features as a bank. These usually include:
- Competitive variable or fixed interest rates.
- Favourable loan terms.
- Flexible repayment schedules.
- High borrowing limits.
- Varying loan types — such as secured and unsecured loans — to fit your needs.
- Loans for a variety of different needs, including buying a car, taking a vacation or renovating your home.
In addition, perks offered by nonbank lenders may include access to resources to get out of debt, free credit score monitoring, access to a financial advisor and more.
When you opt for an alternative lending solution, you open yourself up to a new world of features and benefits, including:
- Innovative lending solutions. Independent lenders can sometimes offer innovations that larger banks take longer to implement — like single-form loan applications and online approval tracking.
- Bigger savings for customers. Some lenders, such as credit unions, are not run for profit, which means customers of the credit union are considered shareholders. Any profits are put back into the products, which then translate to savings for customers.
- Personal customer service. Many credit unions have histories rooted in local communities and organizations that can offer a level of personal customer service that’s not always possible for larger financial institutions.
- The lender’s reputation. No matter which lender you apply with, be sure to check the reviews online to see if they’re legitimate as a company and if the loan product is safe. Read real customer reviews and check the Better Business Bureau (BBB) website.
- Interest rates. Carefully consider interest rates to confirm they’re in line with what other lenders are offering. You may find lenders that offer fixed-rate personal loans. Although rates may be higher, these loans offer predictable payments with dependable terms, while variable rates can fluctuate over the course of the loan.
- Origination, early repayment and other fees. Fees weigh heavily in the overall cost of a personal loan. Know whether you’ll pay an application fee or fees for early or additional repayments on your loan. The best way to compare two different loans is to compare the annual percentage rate (ARP) of each.
There are many safe and legitimate nonbank lenders out there. While it can be more difficult to determine if an online lender is legitimate, credit unions tend to have physical locations which you can visit in person. When looking into a loan from a nonbank lender, you should be wary of the following:
- Scammers can prey on people looking to borrow money online by posing as a company, asking for an upfront fee and then disappearing.
- Some lenders will offer you more money than you actually need. Only borrow the amount you need since you’ll be paying interest on the amount borrowed.
- If you don’t think you can make your repayments on time, avoid taking out a loan in the first place. There may be other financing options better suited to your situation.
Once you’ve compared your loan options and narrowed down your choice to one, head to the lender’s website via the “Go to site” button to apply for your loan. You’ll be redirected to a secure loan application page where you can fill out the necessary information. Keep in mind that most lenders require the following information as you proceed with the application:
- Contact information. You’ll need to provide your full name, email address, home address, phone number and date of birth.
- Government-issued ID. Just like with a bank, you’ll need to provide a valid photo ID — for example, a passport or a driver’s license — as part of your personal loan application.
- Your financial details. In addition to your credit history, a nonbank lender will ask about your current debts, including any other loans you might have and open credit accounts.
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