At one point in your life, you may need some financial help to cover an unexpected expense, such as a medical emergency or a home upgrade. This is where online loans available in Canada come to the rescue. These are some of the most popular financing options for people who are in dire need of instant cash.
Luckily, with the rise of many technological innovations these days, taking out loans is only just a few clicks away. However, even if this type of financial solution is convenient, it’s still important to educate yourself about the processes and policies involved.
So, if you’re planning to apply for online loans in Canada, below are a few tips to consider from the get-go:
Determine How Much Money You Need
Before applying for an online loan in Canada, you should first decide how much money you need to fund unexpected financial expenses. Since most loans come with interest rates and other charges, you should carefully compute the debt you can handle based on your current financial situation.
For instance, if you have a family, consider your household expenses and borrow less than your maximum income to avoid going beyond your budget and facing some financial hardships later on.
Moreover, in determining how much loan amount you need, you should also take into account the effects of obtaining a small or large loan. Typically, when you get an online loan that’s too big, you might have a hard time paying it out within the required period. On the one hand, when you apply for a small loan, you might not be able to settle all your financial needs. Having said those, you should be smart in deciding how much online loan you should get.
Choose The Right Type Of Loan
There are many loan types available today. Depending on your personal qualifications, such as credit score, stable source of income, and current financial standing, you might qualify for some or get rejected for other types of loans.
Thus, if you’re looking for the perfect type of online loans in Canada, below are some of your options:
Personal Loans – If you’re funding some personal expenses, such as a family vacation, a home improvement project, or your children’s school fees, getting a personal loan can be an excellent idea. This is also the most common type of loan you can take out online.
Business Loans – If you’re operating a startup home-based business, you can take out this type of loan online. With a business loan, you can borrow a much higher amount of money for your business needs.
Payday Loans – This type of loan depends upon the gross amount of salary you receive each pay period. Usually known as a cash advance, a salary loan can be paid in a lump sum or installment basis after you get your next paycheck.
Look For Various Online Lenders
In today’s world, different online lenders are operating in the financial community. However, not all online lenders are equal when it comes to the loans they’re willing to provide. Having said that, you should carefully choose a lending company that will work best for your financial needs.
To help you end up with the right lender, below are some tips you need to follow:
Factor In The Application Process – Look for an online lender that provides a fast application process. Make sure the lender has an easy-to-use platform where you can fill in an application form and submit documents conveniently and quickly. Also, choose an online lender that offers a short approval and funding timeline, such as within a few hours or days after the submission of your application.
Check Their License – Even if they’re operating digitally, online lenders should have a license before they can offer financial services to their customers. As such, always check your prospective lender’s license documents before applying to make sure you’re dealing with a legitimate company.
Pick A Lender With 24/7 Customer Support Service – Find an online lender with round-the-clock customer support service. Since financial emergencies can happen anytime, they should have someone who can answer your queries even beyond normal busines hours.
Consider Transparency – Always choose an online lender that offers transparency regarding their services. The payment amounts and dates should be accessible online and updated from time to time. This setup can help make the whole loan process accurate and transparent.
Know Your Credit Score
Always check your credit score if you want to apply for a loan. If you have a low credit rating, you might only be given a limited borrowing option.
Generally, your credit score can determine how much loan amount you’re qualified to borrow. In short, having a good credit score increases your chances of getting approved for an online loan at a competitive interest rate.
To know whether you have a good or poor credit score, below is a comprehensive guide to help you out:
A credit score of 740 and above means you have an excellent credit rating.
A credit score ranging from 670 to 739 means you have good credit standing.
A credit score ranging from 580 to 699 indicates a fair credit.
A credit score that’s below 579 means you have bad credit.
Most lending companies consider credit score as the primary loan qualification. However, there are online lenders who are willing to offer loans even if you have bad credit. They have much lower standards when it comes to their borrowers’ qualifications. In case your credit score is poor, you should comply with the minimum requirements, such as having a steady source of income that can help pay your loan. So, if you need fast cash but you have bad credit, an online lender can come to your rescue.
Check The Loan Costs
Just like other financial services, applying for an online loan in Canada comes with costs. This means you have to pay for these fees first before you can receive the proceeds of your loan. However, you should take note that loan costs vary from one lending company to another.
Hence, always find time to check the costs and compare them to get the best deal. Usually, these can include the processing fees, withdrawal fees, and, more importantly, the interest rates. When it comes to the interest rate, make sure to assess how it can affect the amount of money you’re going to borrow. Sometimes, the longer you pay your loan, the higher the interest rate you’re going to pay within a certain amount of time.
Know The Repayment Terms
Aside from the loan costs, it’s also essential to get familiar with the lender’s repayment terms so you’ll know how long you’re going to pay your loan. Normally, choosing a longer repayment period means you’ll pay a smaller amount of money every month. But, you should understand that longer repayment terms mean you’ll have to pay a large amount of interest for the money you’ll borrow.
Because of this, you should factor in the repayment terms you want before applying for a loan. Make sure that the term you choose will allow you to pay off your loans faster and not cause you further financial struggles.
Check The Loan Requirements
As mentioned, loan requirements differ from lender to lender. Thus, before you zero in on one lender, check their requirements first to see if you’re eligible to take out an online loan or not.
Below are the typical requirements you need to comply with when applying for a loan online:
Annual Income – If your lender doesn’t focus too much on the credit score, they might be looking at your annual income to determine your loan eligibility. If you have a higher income, you have a better chance of getting your online loan approved.
Credit History – You should have a good credit history to strengthen your ability to take out a loan. In most cases, credit history of at least three years can be a good starting point.
Debt-To-Income Ratio – This is also one of the things lenders are looking for when someone applies for a loan. This is usually the percentage of your income that goes toward debt payments and other finances. To make sure you get a loan approval quickly, you should have a debt-to-income ratio of 35% or lower.
Once you’re aware of the common requirements for a loan application, get all your documents organized. Aside from your personal information, the lenders will ask for proof of your income and financial standing. So, get copies of your personal identification cards, birth certificate, bank statements, and even your paystubs. When you have all these documents ready, you can make the process more seamless and faster.
Read The Fine Print
To ensure a smooth application process, read the fine print first before you fill in an application form. That way, you’re able to watch out for any red flags that can indicate a scam. There might be provisions in the document, such as payment for penalties and late fees, that might not be listed until you complete the application.
In other words, you should make sure you clearly understand what’s written in the fine print before applying for an online loan. That way, you’ll be able to come up with the wisest financial decisions.
One of the greatest things about online loans is that they can help virtually anyone who has a financial need as long as they’re able to comply with the requirements. If you’re looking for instant cash, getting an online loan could be your best option. And, just like other types of loans, applying for an online loan in Canada isn’t hard if you plan and prepare.
Therefore, keep the tips mentioned above in mind, and you’ll be more confident in getting your loan approved in the most convenient and fastest way possible.