The pandemic has stretched our financial management skills and even pushed some of us on the brink of insolvency. This led to many lending institutions—not only in Canada but also worldwide—to rise to the occasion and offer personal loans with ultra-low interest rates to keep many businesses and families afloat during these challenging times.
While some families choose to stretch their money as far as it will go, others may need some help to ensure they don’t fall into worse financial trouble later on. Looking for the best personal loan may be just what you need to make it out of a rough spot. But what is a personal loan and when should you look for one? Keep reading to find out.
Personal Loans, Explained
A personal loan is best defined as a borrowed sum of money from a lending institution such as a bank, credit union, or online lender. The borrowed money is paid back following the terms and conditions of borrowing, often including a fixed installment payment scheme with interest on top of the principal amount.
Personal loans usually do not require collateral like properties. In these circumstances, they are considered unsecured loans that do not require anything in exchange.
Personal loans have become more mainstream these days, with people coping with financial difficulties brought about by the pandemic. Since it does not have to go towards any specific use, this type of loan is popular among those who just need some fast cash to meet urgent needs.
Personal Loan Types
Personal loans come in different types. They can be classified as secured loans, co-sign loans, fixed-rate loans, variable-rate loans, and debt consolidation loans.
Despite being known as ‘unsecured loans,’ personal loans can also be ‘secured’ as some lenders ask for collateral.
A co-sign loan is basically about the lender requiring the borrower to have a co-signer responsible for settling your debt if you would be running away from your debt.
You can also opt for a debt consolidation loan. This is ideal for borrowers who have existing loans with several lenders. The borrower can pay all his balances from different lenders and have just one loan to pay using this loan.
A variable-rate loan can be your best option if you are looking to pay your loan at a shorter time. The advantage of this type of loan is the borrower is charged with a lower APR.
Fixed-rate personal loans are usually the most convenient for borrowers. At fixed rates, borrowers won’t have to worry about increasing monthly payments.
Getting a Personal Loan
Here are some things you need to consider in getting a personal loan.
- Know your credit score. The approval of your loan and the interest that comes with it will largely depend on your credit score.
- Don’t overestimate. You need to settle with the loan amount that you will apply for. Make sure that its monthly payment is something you can afford to pay, given your monthly budget.
- Choose your lender. Lenders require specific credit scores and borrowing limits. They also charge a processing fee for your loan application. But make sure that you are well-informed about their terms so that you don’t run into hidden charges later on. Choosing the wrong lender can also cost you prepayment or penalties.
Considering some of the tips mentioned above, you will surely handle your loan easily. But before considering getting a personal loan, make sure that where you will be spending the money is worth the sacrifice for borrowing money with interest.
Finding the best personal loan isn’t always easy, but it can make a world of difference for someone who is in need of fast cash. If you’re looking for a personal loan in Canada that has a fast approval process and multiple payment options, look no further than Get Approved. Our personal loans are zero hassle, zero down, and zero stress. Get approved today!