What’s the Best Place to Apply for a Personal Loan?
A personal loan is a way to borrow up to $50,000 for just about any purpose or expense. In Canada, personal loans can be obtained from banks, credit unions, alternative lenders and private lenders. But which is best? Here are some things to consider.
Where to apply for a personal loan
While many banks do offer personal loans, they are not the only option for obtaining this type of financing. As with any loan, it’s worth shopping around and looking at different personal loan rates, terms, and conditions to see what personal loan best fits your needs.
Big Banks
Most Canadian banks offer personal loans; however, banks are considered to be prime lenders which means you do need to have a strong credit score in order to be approved. Those who do meet a bank’s qualification requirements are likely to be offered better rates due to their strong credit history.
Pros
- Easy to apply in person, over the phone, or online.
- Competitive rates for qualified borrowers.
- Big banks may offer loans for larger amounts than smaller financial institutions
Cons
- Strict qualification requirements.
- The approval process can be slow.
- Big banks typically have high maximum APRs.
Credit Unions
Credit unions work similarly to traditional banks, but since credit unions are non-profit organizations and owned by their members, they tend to offer more flexible qualification requirements, and sometimes, more competitive rates.
Pros
- Potentially lower-interest rates.
- Potential for more relaxed income or credit score requirements.
- More personable customer service.
Cons
- You must qualify for membership, which may include opening a deposit account.
- Potentially fewer physical locations.
- Max loan amounts may be lower than what’s offered at bigger banks.
Alternative Lenders
If you’re unable to qualify for a personal loan from a bank or credit union, alternative lenders may be an option to consider. An alternative lender will still have strict guidelines when it comes to the repayment process, but they may be more lenient when it comes to the qualification process. In exchange for the risk involved with approving a borrower with a lower credit score or income, for example, an alternative lender will typically charge higher interest rates.
Pros
- Easier to qualify.
- Potentially faster approval.
Cons
- Higher interest rates.
- Potentially less favourable repayment terms.
Private Lenders
A private lender is an individual, group, or even a business that is willing to loan you money but isn’t associated or affiliated in any way with a traditional financial institution.
Private lenders don’t have to follow the same regulations as banks or credit unions which means they can be a lot more flexible in how they lend, and to whom. It’s often much easier to be approved for a personal loan by a private lender, however, since they do take on more individuals with low credit scores, they often charge much higher rates.
Pros
- Easier to get approved, particularly if you a low credit score or thin credit history.
Cons
- Much higher interest rates (and less favourable terms).
- Private lenders aren’t subject to federal regulations, which may leave you vulnerable to risky lending or collection practices.
Frequently asked questions
Where can I apply for a personal loan with bad credit?
Where can I apply for a personal loan with bad credit?
Yes, it’s possible to get a personal loan with bad credit. Borrowers with credit issues will find it difficult to be approved by banks and other ‘prime’ lenders. Alternative lenders and private lenders are worth considering if you have a low credit score but need a personal loan.
What’s the best place to apply for a personal loan?
What’s the best place to apply for a personal loan?
A personal loan isn’t a ‘one size fits all’ type of product. The best place for you to get a personal loan might not be the best for someone else. Personal loan options vary based on your needs, credit score, financial history, etc. This is why it’s so important to shop around.
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