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How To Apply For A Loan In Canada

3 Mins read

Whether you are looking to fund your overseas trip or ramp up your fledgling startup, applying for a loan saves you the high interest charged on credit cards. But before you apply for the loan, it’s important to vet the loan application procedures and interest charged by different lenders so as to increase your odds of success. If you are already residing in Canada, here are steps to applying for a loan facility.

The first move would be to familiarize yourself with the financing options available in your province. One of the most popular sources of information on the Canadian lending industry is Smarter Loans – Canada’s Loan Directory. Feel free to visit the site as a starting point.

  • Establish your credit score

How To Apply For A Loan In Canada

The amount of loan that you can access is anchored on your credit score. Basically, borrowers with good credit scores are more likely to get their loans approved and payable with lower interest rates. Lenders may also use your credit report to evaluate which other financial products they can extend to you beyond a general loan. You can get your credit score for free from Trans Union of Canada and Equifax Canada Inc.

  • Fill in the necessary application forms

Once you have accessed your credit report, the next logical step is to fill in the necessary loan application forms that will be used to decide on loan amount that can be extended to you. It’s only vital that you apply for a loan based on credit score to boost your odds of landing the loan the first time of application.

Depending on the type of loan you are looking for, the application and qualification criteria will differ. For example, if you are looking for personal loans, you’ll need to have some regular income and decent credit history in order to avoid high-interest rates. For business loans in Canada, your business must be active for at least 6 months and generate $5,000 in monthly revenue.

  • Valid security

If you are to get your loan approved, you’ll need to provide a valid and enforceable security. The lender is compelled by law to ascertain that a security agreement identifying the collateral is signed. The lender must also certify that the borrower has rights to the collateral.

  • Evaluate your credit needs

Once you have handed in your application form to the loan officer, it’s important to revisit your financial needs you intended to solve with the loan. This window gives you a chance to prioritize the needs if the estimated loan can’t cover your prospective needs. Planning before the loan is approved guarantees sober decisions than if planning when you have the money. This window gives a chance to think over the repayment plan of the loan facility.

  • Complete a Loan Contract

Once your preferred lender deems you qualified for a loan, the next step is to sign a loan agreement that acts as the binding document between you and the lender. The loan agreement spells the loan amount and the interest charged, payment schedule, binding effect and witness’ signatures.

Remember to always read the fine print and ensure that you understand the terms and conditions of your contract. It is important to deal with a transparent lender that clearly outlines all the details. You can explore Smarter Loans, Canada’s loan directory, to discover the country’s most reputable personal and business loan providers.

  • Repayment of the loan

Having your loan approved might be the easier part of the loaning. How you repay your loan can either improve your credit score or see you lose the assets that you may have used as collateral.

It’s imperative to keep the lender informed on your repayment progress and especially if you experience difficulties that may alter your repayment schedule. Often times, borrowers end up in the wrong books of lenders by simply failing to negotiate for an adjustment to their payment schedule if they don’t have a capacity to repay as earlier agreed.

Bottom line

A well planned out loan facility can help boost businesses and even improve one’s financial well-being. The first step to achieving this success is to know where to get these loans. The next important step is to understand the application procedures that will guarantee you success.

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