You want a new or used vehicle? You’ve been dreaming of taking this trip to the Maldives for a long time? You want to get married? You may need a loan!

Personal loans account for almost  one-third of the loans granted by financial institutions. They owe their success to the fact that the borrower can finance various projects without justifying the purpose for the money. Also the borrower does not have to dispose of the funds, nor have to dip into his personal savings.

On the other hand, a personal loan is not the right tool to finance a house or apartment. In addition to the fact that the amount is capped at $50,000 in Canada, the maximum durations and rates proposed are not suitable for this type of project, since terms range from 3 to 60 months.

The benefits of personal loans

As already mentioned, the personal loan has the advantage of great flexibility, since you don’t have to justify the use of the funds to your creditor. Whatever you use the money for is left to your discretion.

There are still some important prerequisites such as proving that you are of age, that you do not have a problems with banks, that you have a good credit history and that you are able to provide sufficient guarantees if necessary.

As soon as the financial institution approves the loan, the funds are deposited into your bank account and are ready to be used.

  • Enter your personal information.
  • Choose the amount of your loan and frequency of your payments.
  • Write down 2 references.
  • Download your documents in pdf or jpeg.
  • No credit score checks.
  • Do the instant bank verification.
  • Approved? Get your money the same day!

 

The major drawback of personal loans

The great freedom of use of personal loans is its greatest advantage but also its greatest disadvantage!! Indeed, since it is not related to, for example, the purchase of a car or furniture, there is no guarantee for the product/service you have purchased.

In other words, you buy a product (used car) or service (travel package)  and the company goes bankrupt and does not deliver what you bought from them, you  have no recourse and you still have to pay your personal loan under the terms stipulated in the contract.

Features of a personal loan

Most financial institutions offer loans ranging from $1,000 and $50,000.

Depending on the lender’s policy, on your situation (income, debt ratio) and the amount requested, the interest rates are generally fixed, but it is possible that the lender will offer variable rates. 

At Credit2Go we offer micro-loans, from $250 to $1,500 with a fixed interest rate.

The debt ratio is the main obstacle because the amount that will be granted to you is limited by this indicator. Your debt ratio must not exceed 33% and is calculated as follows:

Total debts each month (car, credit card, mortgage, furniture payments, etc.) DIVIDED by your gross monthly income. If your monthly debts total $1,000 and you have a monthly income of $3,500, 

your ratio = $1,000/$3,500 = 0.2857 = 28,57%. This figure is less than 33% and you have a very good chance of getting being approved for your loan!

Remember that you must remain reasonable. Borrowing money, whatever the amount, is a serious responsibility and it will have to be repaid. Ask yourself if you really need to borrow and make sure you have the capacity to pay back despite the possibility of unforeseen events (job loss, death of a loved one, accident or illness, etc.).