5 Facts You Should Understand About Applying for Loans in Canada
The concept of borrowing money to achieve specific purposes is just as common in Canada as any other nation. What you may not know is that there are aspects of applying for a home equity loan or using some type of business loan to make your company more functional that you should consider closely. Here are a few facts about the present usage of loans in Canada and how they may apply to you.
More Small Business Owners are Seeking Equipment Loans
In decades past, it was owners of larger companies that tended to seek out loans for equipment. While that’s still common, the last two decades have seen an increase in small to mid-size business owners applying for equipment loans. Statistics Canada reports that 51.3% of small business owners have active loans or have paid off loans of this type in the last year. This includes entrepreneurs who may be operating a small business out of the home.
A Quarter of Canadian Residents With Home Equity Loans are Paying the Interest Only
Of the residents who currently have home equity loans, a quarter of these debtors are paying on the loan interest only. This finding comes from a 2018 study conducted by the Financial Consumer Agency of Canada using data supplied by the Bank of Canada and other lenders. This reflects a trend in the home equity loan sector that has been present since the beginning of the 21st century.
Equipment Loans May or May Not Require Collateral
Traditional wisdom holds that loans for equipment must have some sort of security. That’s still true in many cases. However, there are more lenders today who are willing to provide unsecured equipment loans. While qualifying for an unsecured loan is more difficult and it’s likely to carry a higher rate of interest, this solution is attracting attention from a significant number of business owners.
Funds for Home Equity Loans Are More Often Used to Make Property Improvements
What’s the single most common use of the funds from a home equity loan? Property improvements and upgrades leads the pack with ease. Lenders like this because it enhances the market prices of the property and helps to lower the risk of doing business with the client when that property is pledged as security.
A second common function of these loans is to purchase properties like lake houses, or smaller second homes as investments. Lenders also like this arrangement, since current policies typically mean they will only lend up to 80% of the market value of the primary property. In the event of a default, recovering the balance is usually not difficult.
While More Equipment Loans Are Supplying Funds to Replace Obsolete Equipment
There’s no doubt that many loans for equipment help start-up companies secure what they need to operate. What you may not know is that established business owners often use the proceeds from these loans to replace aging equipment. In a time when technology can make equipment that was state of the art outmoded in five years or less, securing new equipment can be the difference between maintaining market share and falling behind the competition.
Are you thinking of applying for a loan? Talk with lenders who have experience with the sort of lending that you need. Remember to compare your options and make sure that you can comply with the terms and conditions. Doing so allows you to enjoy all the benefits associated with the loan and will make it all the easier to obtain funding the next time you need it.