If you need to borrow money, you can apply for a loan online. But where do you start?
There’s a huge marketplace for loans in Canada. Some loans exist to provide people with money for whatever they'd like, whereas others are designed for specific purchases.
When applying for a loan, many people think they need to visit a bank. While this is common, you can get a loan online just as easily so you don't have to leave the house. Not only is this process quicker, but it also allows you to compare rates.
Before you start applying for loans, you should get an idea of what some of the most common loans are. Then, you can determine which one would suit your situation best.
Here at Insurdinary, we'll teach you everything you need to know about loans and how to apply for a loan online. Read on to learn more!
Types of Loans
Before getting a loan, you should figure out what type of loan you need.
Unfortunately, many people are unaware of their options. So let's explore the main types of loans you can get.
One of the most common types of loans is the personal loan. Anyone can apply for personal loans because they aren't designed for a specific use. Whether you want to use it to pay off another loan or buy something for yourself, you can do that.
You can apply for personal loans at many banks and other financial institutions. When applying for one, you can specify how much you’d like to get. The bank will determine if you’re eligible for based on your income, credit history, and current debt.
Many lenders will fund you within a few days, though the process may take longer if you don’t have the necessary documents prepared. When you are getting a loan online, you’ll be expected to upload everything during the application process.
LoanConnect is a great option because their online platform allows you to search for loans best suited for your financial needs. As Canada’s leading personal loan search engine, they connect you with lenders offering loans between $500 to $50,000 with repayment periods between 6 and 60 months.
Another great option is LendingMate especially if your credit score isn’t in its best shape. Through the use of a guarantor, they offer personal loans up to $10,000.
Car loans are designed solely for purchasing a vehicle. Similar to a mortgage, you'll never see the money because it'll be sent directly to the seller. Getting a car loan also involves going through a similar process as for a mortgage.
To get a car loan, you’ll need to find a dealership that allows financing. They’ll tell you how much you qualify for so you can then choose a car. When you’ve picked a car, you’ll fill out a loan application.
If approved, the money will be sent to the dealership and you’ll have a vehicle. You’ll then be expected to make monthly payments for a few years until it’s paid off. If you’re able to, you can pay off the loan early.
Car Loans Canada is a great option to get your car loan online. They allow you to save valuable time by getting pre-approved for a loan before you even set foot in a dealership. They provide financing for $12,000 to $55,000 with rates as low as 4.49%.
Surely, you are familiar with credit cards but you may not think of using them as taking out a loan. However, credit is technically a loan because you're borrowing money. The main difference between credit cards and traditional loans is that you can keep borrowing in smaller amounts up to a set limit.
When you get a credit card, you have a line of credit that’ll prevent you from overspending. For example, if your card has a spending limit of $3,000, you cannot borrow more than that.
You can find a plethora of credit cards online, all with different lines of credit and interest rates, we suggest you check out our comparison tool. You should get one with the lowest interest rate if you plan on not repaying your balance in full.
Mortgages are loans that can only be used when purchasing a home. Unlike other loans, mortgages have long repayment periods and provide a lot of money.
When seeking mortgage rates, you should be in the process of purchasing a home. You cannot get a mortgage unless the lender knows what type of home you’re buying.
The only downside to getting a mortgage is that the bank will technically own your home until you pay it off. If you miss payments, they have the right to sell your home to get their money back. However, you shouldn’t have any problems if you’re making monthly payments on time.
When your mortgage term is over and you still owe money, you can choose to refinance or renew the mortgage. This allows you to change lenders, get lower interest rates, and change how much your monthly payments are.
Breezeful is a great platform to apply for mortgages online. As a digital mortgage broker, they provide you with the means to compare 30+ lenders to find the most competitive rates. Through Breezeful’s online portal, you can easily and quickly apply for a mortgage, upload necessary documents, and track your approval in real time.
Improving Credit Score to Qualify
Before applying for any loan, you must ensure that you have a good credit score. Your credit score is an indicator of how well you manage debt.
Unfortunately, many people apply for loans with poor credit and end up getting denied. You can check your credit score to see where you currently stand.
You should never apply for a loan with poor credit because getting denied will decrease it even more. However, if you raise your credit score, you'll show lenders that you're responsible and can handle debt.
This is what you can do to raise your credit score as quickly as possible.
One of the main things you should do is stop borrowing money. Lenders don't want to see you borrowing at all times because it shows them that you're not making enough money. If you don't have enough income, how will you afford something like a mortgage or car loan?
When you stop borrowing, you’ll prevent yourself from getting into debt you can’t afford.
While it’s okay to borrow occasionally, don’t make it something you do all the time. Keep in mind that you must borrow money if you want to build credit, but you should do it responsibly. Start by paying your credit card bill in full on time.
Pay Off Debt
Aside from not borrowing as much, you should focus on paying off debt. While this may seem obvious to some, the approach that many people take isn't optimal. For example, you shouldn't just start making random payments.
One of the best ways to pay off debt is to concentrate on the loan with the highest interest. This is important because if you don’t get rid of it, you’ll pay a lot of money on the interest that could have been avoided.
Put as much money as you can towards the loan with the highest interest rate and make minimum payments on the others. After paying off one, you can move to the next loan with the highest interest. Continue doing this until all of your debt is paid.
Another great option is to consolidate all of your existing loans into one place. Check out our guide on loan consolidation in Canada.
Use a Credit Card to Build Credit
Because borrowing money is necessary to build credit, getting a credit card is a great way to do so without applying for loans.
When using a credit card, you should make smaller purchases that you can pay off without a problem. Maxing out won’t help much because your credit report will show that you have high credit usage and you might struggle to pay off your balance.
Ensure that you make all monthly payments on time and pay off early when you can. As you continue using the card, the provider may increase your spending limit. Don’t use this as a reason to spend more than you can afford to repay.
How to Get a Loan Online
Now that you have a better understanding of different loans and how to improve your credit score, it's time to apply for a loan.
Compare Terms and Rates
Each lender will have different terms and rates for their loans. Finding one that offers favorable terms and rates is crucial because you'll be more likely to pay it off.
If you have poor credit, you'll need to find someone that offers poor credit loans because many lenders will deny your loan application.
When you're ready to apply for a loan, you should immediately gather several documents to ensure the process goes smoothly. Some of the main documents you'll need should show proof of income, debt history, proof of citizenship, and the property you'd like to purchase (if applicable).
Make digital copies of all these documents so that you can upload them when asked during the loan application process. The lender may reach out to you if they need additional documents, so be prepared to upload anything related to your finances.
When approved, you'll receive funds and can use them immediately. When getting a mortgage or car loan, they'll be sent to the appropriate recipient within a few days. If you're getting a credit card, it'll be shipped to you within a few weeks.
You'll have about a month until you must make your first payment and that'll set up the payment cycle for the rest of the loan term. Many people prefer to make payments in the beginning or towards the end of the month, but your cycle may vary depending on your terms.
Now You're Ready to Apply for a Loan Online
After reading this article, not only do you know about different types of loans, but you also what's required to get them. Understanding how to apply for a loan online will ensure that you can get one without any problems.
With this information, we encourage you to look at your credit score and determine whether you'd be eligible for a loan. While you can find poor credit loans, improving your credit gives you access to larger loans with better terms.
No matter what type of loan you need, make sure that you research different lenders and loans before applying.