Many Canadians rely on loans for financial emergencies, major purchases like a car or house, and even higher education. The problem is, not all Canadians can qualify for a loan from a traditional financial institution, like a bank, due to poor credit. Thankfully, there are alternative options for these consumers. Online loan providers offer Canadians the ability to access the credit they need, whether they’re new to Canada, have struggled with debt in the past, or are simply looking for a different option.
Types of Loans Available Online in Canada
There are four major types of online loans you can get in Canada. Depending on what you’re looking to finance, one of the following will suit your situation more than the other.
Personal Loans
A personal loan is often the go-to option for consumers who are dealing with an unexpected expense or a large purchase they cannot afford to pay for in cash. The vast majority of online lenders offer personal loans. This means those looking for a loan to suit their unique needs, whether they have poor credit or are interested in a specific payment plan, will have multiple options to choose from
Car Loans
In addition to personal loans, car loans are one of the most popular options that online lenders offer. Online lenders offer car financing options to consumers regardless of credit and provide them with the opportunity to purchase the vehicle they need. Whether it’s to commute to work and generally make their daily lives more convenient.
Lines of Credit
A line of credit is a revolving loan. Through it, you’ll have access to a set amount of funds that you can draw from when you need it. Like a credit card, interest is only paid on the amount used and your limit is reset as you pay it back. Online lenders choose to offer this type of loan as it is versatile and can be used for emergencies, home repairs, or any other reason.
Mortgages
When it comes to applying for a mortgage in Canada most potential homebuyers head straight for their local bank. But, what happens when they can’t get approved because of past financial issues? Online lenders offer the opportunity for these consumers to get their foot in the door with an alternative mortgage product, rebuild their credit, and then qualify for a traditional mortgage in the future. It is a good idea to first figure out how much can you afford when buying a new home. Luckily, Finally can also help you with that.
Where Can You Apply For an Online Loan in Canada?
While banks and credit unions are more mainstream, they are hard to qualify for and often require you to apply in person. On the other hand, alternative lenders have used the power and innovation of technology to expand their lending requirements and automate their underwriting process. This, in turn, has led to faster approvals and a higher approval rate. Alternative lenders have also streamlined the borrowing process and have opened up access to different financial services for individuals who are underbanked. As a result, individuals with subpar credit can apply and qualify for online loans through alternative lenders.
How to Apply For a Loan Online in Canada?
Finding the Best Online Lender
Choosing a lender that best meets your needs can be a difficult process as there are many aspects to consider. From the loan terms to the lender’s reputation, gathering and comparing all this information by yourself can be exhausting and time-consuming.
As well, the best type of loan will depend on your particular financial goal. So first, you have to figure out how long do you want to have debt for and how much can you comfortably pay down on a monthly basis. Make sure to use Finally to help you understand the type of loan that is best for you based on your particular financial situation and future goals.
You can also use loan comparison platforms to speed up your research (Loans Canada is a good place to start), and with that you can:
- Compare hundreds of lenders in one place. Through it, you’ll be able to read reviews on lenders in your province according to loan type.
- Choose the loan option that best suits your needs. You’ll be able to compare loan amount, term length, APR, funding time, repayment options, and more.
- Get a quote: With a single application, a loan comparison platform can provide you with multiple quotes from different providers. This, in turn, can ensure you get the best platform loan term.
- Save time and money. Rather than calling different lenders and examining what options and rates they have, you can use a loan comparison platform to do all the research for you. All you have to do is compare and choose which option best meets your needs.
When applying for a loan, researching your available options is an important step in finding the best loan and lender for you.
What Online Lenders Look For in an Applicant
Unlike banks, alternative lenders don’t base your approval on just your credit score. They evaluate your application based on a number of financial aspects. Just like a bank, alternative lenders need to assure that you are creditworthy; meaning you are capable of paying back the loan you are applying for.
- Income – Your income level is an important factor that lenders will consider prior to approving your loan. The higher your income the more money you’ll be eligible to borrow. Most lenders will verify your income in one of three ways, pay stubs, your T4 from the previous year, online bank statements.
- Debt level – The amount of debt you currently have can impact your ability to get a loan. Lenders usually check your debt-to-income ratio to see if you can handle another loan. If the new loan causes your debt to exceed your income or doesn’t provide you with enough for your living expenses, then you will likely be rejected.
- Employment history – Your employment history is often checked by alternative lenders as well in order to assess your job’s stability. If you don’t have a sporadic job history with big-time gaps between your jobs, then you will look like a more reliable applicant.
- Credit score – Finally, online lenders will often still want to check your credit. However, don’t be scared if you have bad credit as alternative lenders base your approval on your overall financial health. Your credit score is just one of the many things they may evaluate.
Documents Required
Depending on the type of loan and lender you apply with, the information you’ll need to provide will vary. However, for almost all loans, you’ll need to prove your identity and income.
Personal Identification
- In order to prove your identity, most lenders will ask you to provide a government-issued photo ID such as a driver’s license or passport.
Income Verification
- To verify your income, lenders may ask you to provide your bank statements, pay stubs, tax returns or some other document that will allow them to confirm your income. They may also ask about your employment history to evaluate your job stability.
Other Financial Information
- In addition to that, you may need to provide additional information depending on the type of loan you’re applying for. For example:
- For a mortgage: mortgages require you to provide a number of other documents including proof of a down payment and property details such as the MLS listing, purchase and sale agreement, property tax estimates and more.
- For a car loan: you’ll need proof of insurance, vehicle details such as the car make and model. If you’re trading in your car, you’ll also have to provide your title and registration papers.
Bottom Line
Applying for an online loan can be daunting when you’re not prepared. But by researching and preparing yourself prior to applying for a loan, you can discover your best options. Research can be a lot of work, but the benefits you reap are worth it. Moreover, you can use a loan comparison website site to help facilitate the whole process. By doing so, you’ll be able to read reviews, compare loan terms and get quotes with the single click of a button.
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