As much as you do your best to stay on top of your finances, stick to a budget, and keep your financial affairs organized, things don’t always go according to plan. After an emergency expense, like an unexpected car repair, your finances may be left reeling, especially if you’re already trying to squeak by on a tight budget.
So, what happens if you need a little extra cash for an emergency but have already tapped your savings account dry? In these situations, online loans in Canada could be a short-term solution. But what are online loans, how are they different from in-person loans, and why would you want to apply for one in the first place? We’re going to answer all these questions and more in this basic guide to online loans.
In a broad sense, online loans are generally loans that you apply for over the internet. This means that in most cases, you’ll submit an application online, and be funded by direct deposit into your bank account. Having said that, it’s important to remember that some loans may not be offered exclusively online, and a lender that offers online loans may still offer loans at a physical location.
There are all sorts of loans that could fall under the umbrella of online loans. They can be for your business or for personal use, although we’ll primarily be talking about online personal loans in Canada on this page.
Like we just touched on, there are all sorts of online loans that may be available to you in Canada, and they all have their own specific features and uses. It’s important to understand what your potential options are before you try to get a loan online, so to help you get started, here are some common types of cash loans online.
If you’ve ever used a credit card before, you may have a good sense of how a line of credit functions. Just like credit cards, lines of credit are a kind of revolving credit. What does that mean? If you’re approved for an online line of credit, instead of getting your funds in a lump sum, you’ll be given a credit limit. The amount of your credit limit is determined based on several factors, like the type of line of credit, your credit history, your income, and more. From this credit limit, you can generally draw however much money you need, whenever you need it, as long as you have credit available to you at the time. As you pay off what you owe on your line of credit, you can continue to borrow funds from your available credit.
With a line of credit, interest/fees will generally accrue on the amount of money you’ve drawn, not the total amount of your credit limit.
Unlike lines of credit, installment loans online aren’t a type of revolving credit. Instead, if you’re approved for one, you’ll be given whatever amount you’ve been approved for all at once. There is a set loan term with a fixed number of scheduled payments to be repaid over time. Additionally, because funds are extended in a lump sum, interest/fees begin to accrue right away.
We’ve looked at what online loans are, but why would you want to apply for one of these loans in the first place? Let’s take a look at some of the benefits that they may be able to provide depending on what your personal situation is.
If you’re thinking of applying for a loan, it’s always in your best interest to take a close look at the field to try to find something that’s well-suited to your situation. If you’re in the market for an online loan, your first step could be to search online for personal loans that are offered in your province or territory, pull up the options that you come across, and then compare the important details of each one you find. From there, you can decide what’s best suited to your financial standing.
For instance, if you don’t have the strongest borrowing history and you have bad credit, accessing credit can sometimes start to feel a little out of your reach. However, researching online is a good starting point to see what credit options are available to you. While your credit score can still play a role in your ability to get approved and the rates you’re approved for, with some lenders, it may not play as big of a role as it normally would. Instead, some lenders that offer bad credit loans online or in person may consider other factors in your application, such as your income and employment situation.
Either way, comparing loans online may make the research process easier for you so you can make an informed decision.
One of the main benefits you’ll see with loans online is how convenient the application process can be. You can apply for an online loan from wherever you have internet access. This could be from your home, or when you’re on the go.
In most instances, you won’t have to worry about dealing with usual business hours to fill out an application; you can fill out an application for online personal loans in Canada 24/7.
Not only is the application process convenient for online loans, but with some lenders the process may be quicker than applying for a loan in person. The time it takes to fill out an application online is often just a few minutes, and with some lenders, if you’re approved, you may even be able to get your money deposited into your bank account in a single business day.
There are a few differences to the online loan application process vs. the exclusively in-person process that you’ll want to understand ahead of time. But how do you decide which option is right for you? A good way to start is to ask yourself a few important questions to give you some direction, like:
Working through your answers to these kinds of questions can help to give you a better idea of whether you should apply for a loan in person or online.
There will be differences between various lenders that offer or service online loans, including eligibility requirements. Having said that, there may be some overlap with respect to what criteria lenders look for.
One important criteria that some lenders may assess is your credit score, which provides some insight into your borrowing history. They may also try to validate your ability to repay your loan by looking at your employment status, your income, and more. No matter who you’re applying for a loan with, it’s a good idea to get a sense of your chances of qualifying before you actually apply.
Like we’ve mentioned before, your credit score can have a big impact on your ability to get approved for online loans. If you have poor credit, it may be tougher for you to qualify for a loan in the amount, or with the type of rates, you may be looking for.
With that in mind, there are still loans out there that are designed for people who don’t have the strongest credit history, and these loans can be found through online lenders as well. While they still may look at your credit score, they’ll focus more on things like your income and employment status. If you’re considering applying for bad credit loans online, you should only apply for one if you’re faced with an emergency expense and you know you can repay the loan.
Generally speaking, online loans in Canada can fall into one of two categories – secured or unsecured loans. This is an important distinction to understand when you’re trying to decide what type of loan is right for you.
If you’re in the market for a secured loan, you’ll need to be prepared to provide the lender with an asset in order to qualify, which the lender could seize in lieu of payment in case you aren’t able to pay back your loan. This asset is called collateral.
As you might imagine, the main difference with unsecured loans is that you won’t need to put up an asset as collateral. While that may sound like a comforting thought, it’s important to point out that because lenders that offer secure loans can leverage your collateral, the rates of these loans may be lower than those of unsecured loans.
When it comes to short-term personal loans online, one of their main functions is going to be as a safety net for emergency situations. What constitutes an emergency expense? Well, this could include things like:
While the nature of an emergency may be specific to you, just remember not to apply for online loans for anything that isn’t an essential need, like a vacation, shopping excursions, or even for your long-term savings plans. And while you may be facing an emergency, you should also remember to only apply for personal loans online if you know you’ll be able to repay your loan.