Debt is a constant issue for many Canadians, whether they have a mortgage, car loan, student loan, or credit card. Several people out there are looking for private lenders for personal loans in Canada. There are many different types of loans to help people alleviate the burden of debt and have some more money in their pocket. Knowing what are the different types of personal loans will help you decide which type is best for you. This blog post will provide brief descriptions of each type along with helpful tips to avoid getting into debt.
What Are Different Types Of Personal Loans?
1. Home Equity Loans and Lines of Credit
A home equity loan and a home equity line of credit are different names for the same product. This type of loan is usually used for debt consolidation, home improvements, or possibly for a college education for a child or spouse. The interest rate charged on this loan is determined by how much you want to borrow, your credit score, and whether you have any outstanding debt on other loans. This loan usually has no origination fee but may have other fees involved in getting it approved. These include appraisal fees, application fees, document preparation fees, credit report fees, and processing fees.
2. Personal Loans
There are two different types of personal loans: secured and unsecured. A personal loan can be used for almost anything that will help you improve your financial situation. Maybe you want to consolidate debt, go back to school, or possibly purchase a car or home. Secured personal loans have collateral such as a vehicle or house that is held in case the borrower defaults on the loan. These loans usually have lower interest rates but can take longer to process because of the extra paperwork and verification involved with these types of loans. Unsecured personal loans are not backed by collateral and therefore have higher interest rates. These loans can usually be obtained quickly and easily with little paperwork or verification but these loans also have a higher risk of default. The interest rate on these types of personal loans will also vary depending on how much you will borrow and your credit score.
3. Business Loans
A business loan, even if it is unsecured, usually has a low-interest rate because the lender is still interested in the potential profit from the business in the future. The terms and conditions of the business loan may depend on whether it is a startup or established business, how soon you will need the funds, and your current financial situation. It is important to understand how the interest rate is determined if you are applying for a business loan because having a higher interest rate will mean that you may not be able to afford your loan payments in the future.
These types of loans have the highest interest rates and fees in the lending industry. An extension fee, origination fee, and annual fee are just some of the charges that come with this type of loan. These loans are easy to get approved, even with less than perfect credit, but they also usually have a short repayment period which can cause problems in meeting these deadlines without paying another extension fee or increased interest rate.
5. Credit Cards
Credit cards have a high-interest rate since they are more of a debt than an actual installment loan from the bank. However, with higher interest rates comes more protection for you and the credit card company should you default on your credit. Credit cards are usually easy to get approved but there is usually a fee involved for opening or closing the account as well as a monthly interest rate that goes up based on how much money you have put on your card over time. Although credit cards can be beneficial, it is important to keep in mind that these loans are not considered an unsecured loan so taking out too much money in debt will not protect you if you cannot make your payments at all.
6. Installment Loans
These types of loans have fixed rates and payments that extend out for a few years. Some of these loans are also available with payment plans that cover a longer period of time to help you pay off the loan. These types of loans will have lower rates and lower fees than other types of loans but usually, they will take longer to be approved or may be more difficult to get approved at all without good credit. These loans are also available in many different amounts, jobs, and income levels so it is important to choose wisely when applying for an installment loan.
7. Government Loans
Federal student loans are available if you want to go back to school or upgrade your education at a vocational school. Just make sure you understand the terms and conditions of your loan and there are many different types of federal loans with different interest rates, eligibility requirements, and repayment plans. The Federal Student Loan Consolidation program makes it easier to manage multiple student loans in one payment plan rather than several separate payments. Other government loans may be available if you are starting a business or need money for other personal needs. These loans will have fixed interest rates and similar terms as most other types of installment loans but it is important to apply for a loan that will provide the best benefits for you.
8. Credit Unions
Credit union loans tend to be very similar to most other types of installment loans with fixed rates and payments but their fees and requirements may be different. Some of these loans may be available through your employer if they are affiliated with a credit union. Credit unions provide several different types of services for their members but it is important to check out all of the details before signing up for any type of loan from them.
9. Online Loans
Online payday loans are usually based on income and credit rating so they can usually get you approved no matter where you live or your current financial situation. They are also known as Cash Advances or Payday Loans and they are usually available in about 15 minutes so you can get money fast. These types of loans typically have very high-interest rates, fees, and other types of financial charges but they will be able to give you some relief if you are financially strapped.
Many people are unaware that there are several different types of loans to choose from when they need to borrow money. Each type of loan has specific terms, fees, and requirements that you must adhere to when making your payments or this could impact your credit rating in the future. If you need a loan that will fit into your budget while providing help with unexpected expenses then an installment loan may be right for you. Well, you can have a look at different types of personal loans and then decide the best i.e. that meets your needs.
Though if you are looking for private lenders for personal loans in Canada, then Canadian Cash Solutions can be the right place for you.