You may be wondering what differences there are for Canadians when it comes to bank loans versus private lender loans.
In Canada there are different options available for quick funds. Whenever possible, people trend towards banks which tend to offer secured loans to those with good credit scores. They offer better interest rates and lower fees but require a sufficient financial history.
Private lender loans usually unlock money for those who don’t qualify for a standard bank loan. Canadians with bad credit can still reach out to a company like Lend for All Canada to access financing during an when other options appear blocked.
What is a Bank Loan?
A bank is the first thing Canadians think of when it comes to loans. They are secured institutions that we all have money saved in. Bank loans are issued all the time to cover large purchases like dentists, college degree or even something fun like a new car.
Banks are the go-to in ideal situations, providing small loans for emergencies as well as options like a line of credit. The reality for many Canadians, is their credit history makes it hard for them to be accepted for a bank loan.
How do Secured Loans work?
A good way to help get a bank loan, or even better terms for a private lender loan, is to make sure it is secured. A secured loan is one where the amount borrowed is backed by an asset, like a house or something else of value. The beauty in a secured loan is that it helps increase trustworthiness in the eyes of any lender.
There is a risk with secured loans that if you cannot repay it, you will lose the asset. You may also be in a position with no assets and a less than ideal credit score.
What is a Private Lender Loan?
A private lender is a financial institution that offers loans to borrowers that have low credit scores and are otherwise deemed high-risk. A private lender loan will be a short to mid-length and have a predetermined payment schedule. You’ll often gain access to your funds right away and as long as you pay back the loan on time.
Why Choose a Low Credit Loan
Low credit loans offered by private lenders make it simpler for many Canadians to manage emergencies. When bank loans aren’t available, a private lender can help by looking at other things for approval.
A bad credit score is often an obstacle, but private lenders will also evaluate your employment situation and many other factors. Since there is a higher risk attached to this loan, there may be higher interest rates and other fees that make a low credit loan more expensive overall.
The benefit is that by paying your loan off according to your predetermined schedule, you’ll end up improving your credit score.
Repayment schedules and Interest Rates
While private lender loans tend to come with higher interest rates than bank loans, this does not make them a less viable option.
Each lender will work with you, understanding your situation to create a repayment schedule that makes sense. Your personalized rates will be based on your history and designed to help you succeed.
It’s encouraged to make sure you speak with a representative when getting a private loan to ensure that you fully understand all terms and conditions. Ask about any fees and what happens if you want to pay it back early.