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What is a personal loan? in Canada

What is a personal loan?

A personal loan is a type of loan commitment that a customer makes to a bank. The loan is issued on the basis of personal documents of an individual. A personal loan is a fixed amount of money that a financial institution provides at a certain interest rate.

By signing the loan agreement, the borrower automatically agrees to fully repay the loan, to repay the interest component, as well as the cost of all other services included in the loan program.

Beautiful life can not be banned, or Why people take loans?

Loan money from credit organizations is borrowed for various reasons. Someone urgently needs to pay for study at the university, there is not enough money to repair the car, willing to go to vacation. Health problems, the need for surgery or medication are also among the priorities for the loan. Moreover, loans are taken:

  • for the reconstruction of the housing sector;
  • for the change of a house or an apartment;
  • for purchase of garden houses;
  • for an expensive purchase;
  • for the construction or purchase of garages;
  • for the consolidation of other debt obligations.

Personal loans are issued by traditional banking organizations, financial unions. You can get financial aid from alternative sources - pawnshops, payday lenders, title loan companies or from individuals.

Important! Before giving a loan to a private person, the banking organization conducts an analysis of the client's solvency.

Personal loan terms

Despite the belief that everyone can get a loan, in fact this is not the case. So before you go to the bank, you need to understand whom money more willingly is given and whom is not given at all.

Young people with low credit scores have a low chance of success. In Canada, this is an indicator of the level of risks for banks. The lower the points are, the lower the likelihood of credit product approval is.

After examining the main reason of refusal, it is worth dwelling on the categories of people to whom banks lend sums of money most willingly. Such groups of people included as:

  • adult citizens;
  • married couples;
  • families with one child;
  • people with constant jobs;
  • clients with higher education.

In addition, to take a loan, it is desirable to have a high level of income, property ownership, a positive credit record, a permanent residence address.

Reference. To receive money, the client indicates first name, surname, place of residence address. After approval, the citizen is obliged to provide void check, document with personal account details.

Five ways to issue loans

Once all the documents are prepared, financial record is checked, the amount of credit minimum approved, comes the responsible moment - receiving of a loan by the borrower. Currently, several options are available to provide funds by a credit institution:

  • cash at the place of circulation;
  • transfer to a bank account;
  • wire transfer;
  • forwarding directly to credit providers;
  • to a citizen's bank card;
  • to non-resident accounts;
  • by issuing a checkbook.

Which one to prefer - the matter is purely individual. However, you must choose the most convenient one. One that does not require additional cash investments for cash withdrawal.

Types of credit products for individuals

For the average person with an average wage, loans offer great promise. A person can afford something that was previously not available for him or her.

Financial organizations, in turn, develop new and new types of products that can satisfy any, even the most demanding taste. There are different classifications of loans, but common for them are options such as:

  1. Purpose. Depends on the client's goal.
  2. Currency. The borrower chooses the most convenient lending currency for himself or herself.
  3. Security. Loans are secured and not secured. The first ones are provided on more attractive terms for the borrower.
  4. Method of issuance. Several options are possible - in cash, transfer to an account, transfer to a bank card.
  5. Terms of use. Long-term, medium-term and short-term are distinguished here.

Banks issue all kinds of personal loans to individuals. The most popular among them are consumer, cash loan, credit cards and service loans.

What should attention be pay to when signing a loan agreement?

It happens so that in an effort to get the desired, a person inattentively studied the documentation and signed a loan agreement, not having read it to the end. As a result, there are a lot of problems that can be avoided if you approach the issue of loan issuance responsibly. What should I pay the utmost attention to?

  1. Interest rate. The final amount of the loan and the amount of overpayments for the use of borrowed money depend on this indicator.
  2. Monthly payment. Paying back the enormous sums over the course of a term is often an impossible burden to bear.
  3. List of additional services. Some banks connect a huge number of paid options. If you do not pay attention to this point, you can increase your payment by a significant amount.
  4. Fee for cashing out the loan. Sometimes you have to pay a fee to get money from a cash office or withdraw it from a card account.
  5. Penalties. Some banks impose truly enormous penalties for delays or any other even minor deviations from the schedule. In this case, the amount of debt increases exponentially.

The full cost of the loan is another important point that you need to pay close attention to when making a loan.

Attention! Before making a loan commitment, you need to carefully weigh all the terms and conditions. Adequately assess your ability to pay and the possible consequences of breaching the payment schedule.

How not to miscalculate when choosing a banking product?

If the borrower has a good credit record, he or she has different options for credit programs in different banks to choose from. Therefore, it is not recommended to take the first loan that comes along. It is necessary to study the conditions of all financial organizations and choose the most profitable for yourself.

In order not to have to give more than really necessary, the lenser needs:

  • determine the target purpose;
  • study the composition of the documents package;
  • find the best percentage;
  • compare the amount of bank commission;
  • choose a repayment scheme;
  • find out about the possibility of early payment.

A number of banks charge extra interest for early repayment or impose limits on the timing of such payment. Therefore, you should study all the pitfalls before signing the contract. In this case, it is desirable to choose the minimum period of use of a financial product. In such a way, overpayment will not hit much.

Reference. Insurance in Canada is a purely voluntary matter. However, when applying for a loan for a large amount of insurance is better to worry about in advance. This will help to reduce risks in case of illness or job loss.

Personal loan repayment procedure

When a person is lucky and he or she still managed to take a loan and implement his or her plans - this is just the beginning of the story. After a successful resolution of the situation, you should not relax, on the contrary, you need to rationally plan the procedure for repayment of the loan.

For this:

  • find out all the options for making payments;
  • clarify the terms of payment;
  • prepare money in advance for the repayment of the loan;
  • control the length of debiting finances to the account.

Each payment must necessarily be full size. Otherwise, you will have to pay a fine every time. This will vastly screw up the credit record and make it impossible to get a loan in the future.

Attention! The term for making the first payment on the loan comes the next month after its registration.

Consequences of non-payment of a loan

Sanctions applied on the careless payers depend on a particular financial institution. However, whatever these measures are, it is not necessary to take it to the extreme. As the consequences can be very unpleasant.

Among the main sanctions that the bank takes against undisciplined customers there are:

  • Charge of a penalty and a fine. Increase the total amount of the loan.
  • Constant calls and sending letters with the request to pay off the debt.
  • Spoiled credit record.
  • Problems with going abroad.
  • The credit provider's appeal to court.

As a result of the case, the judge can make one decision: oblige the debtor to pay the entire amount, pay the debt through amortization of wages, or pay only the principal part of the loan, excluding interest and penalties.

Instead of afterword

Despite the general availability of credit products, it is necessary to have sufficient financial literacy to use them properly. You should not use loans without serious reason. It is important to adequately assess your solvency and be able to properly plan the family budget.

And even if, as a result of unforeseen circumstances, a person lost the opportunity to repay a loan according to the original scheme, do not hide from problems and pretend that they do not exist. On the contrary, it is advisable to contact the bank as early as possible and report on the situation.

Alternatively, a financial institution may offer debt restructuring or refinancing. The main thing is to be able to make the right decisions in every, even the most difficult life situation.