When you are looking for loans in Canada, you will have a wealth of options at your disposal. However, these will all pretty much boil down to being in one of two categories; traditional bank loans, or private lenders. Which loan type is right for you? Let’s take a look at the pros and cons of each of these loans.
Traditional Bank Loans
This is the type of loan that people are most familiar with. With these loans, you will be heading to your local bank and asking to borrow money. This type of loan is normally applied for in person, but many banks now accept online applications too.
Because banks are very selective about who they loan cash to, these loans are a bit cheaper than those from private lenders. If you have a fantastic credit score and flawless history, then traditional bank loans are probably the best route to take.
Some people also enjoy the more personal nature of bank loans. As we’ve said, with most types of bank loans, you will head directly to your bank of choice. This means that you can talk directly to a real person about borrowing money. Much of the world has gone digital these days, but many people still believe that you cannot put a price on face-to-face communication.
Traditional bank loans may not be for those who need to borrow money quickly. It can take weeks to be approved for the loan if you’re taking it out of a traditional bank. Sure, it’s a great option if your need isn’t urgent, but a lot of people that are planning on borrowing cash tend to need it ASAP.
In order for traditional bank loans to be cheaper than private lenders, they need to be a lot more selective about who they loan cash to. This means that you will find it almost impossible to be approved for this if you have a poor credit history. Finally, traditional bank loans are really for borrowing larger sums of cash. They are not ideal if you need just a couple hundred dollars.
Private lenders like Borrowell are not banks. They simply lend money out – often in the form of personal loans – but some will also offer credit cards and mortgages. Many private lenders will operate purely online, which means you can apply for their loans from the comfort of your own home.
Private lenders are funded differently compared to banks. While banks will loan money that they have sitting in their customers’ bank accounts, private lenders will often work with investors that are looking to generate a return on their investment.
The biggest pro of working with private lenders is that they are a bit more relaxed when it comes to who they lend money to. While you probably won’t be able to borrow money from them if you have no credit history or your credit history is rife with non-payments, many people that would be turned down for normal bank loans will often find that private lenders will work with them. As long as your credit score is not terrible, there is probably a private lender out there for you.
In some situations, it may even be cheaper to work with a private lender. Many banks may offer loans to people with average credit scores but, to counter the risk, they will often charge astonishingly high loan interest rates on these loans. So, if you are looking to borrow money, it is always worth checking out a private lender to see what rates they will offer you.
Private lenders often are a little bit more flexible too. Many can lend as little as $100, and some will even offer tens of thousands of dollars. The repayment terms may be as little as a couple of months to a few years. This means that you have the ability to customize the loan to ensure it is right for you. There is no need to be tied into multi-year loans if you do not want to be.
Finally, private lenders are quicker. In most cases, it will take 48 hours from loan application to the release of money in your account. This is assuming that you submit the correct documents promptly. Because of this, private loans are ideal for those that need money quickly.
If you have what is regarded as a very good credit score, then you will find that borrowing from private lenders will be more expensive than going down the traditional bank loan route. In this situation, you should only be using private lenders if you really need money quickly or if you need just a small sum of money.
Since private lenders are not regulated as strictly as banks, this can make some lenders difficult to trust. This is why it is often recommended that you carry out a rate comparison and do business with only the most trusted private lenders.
Unless you have a brilliant credit score, then private lenders will often give you the best deal on personal loans. Not only will you be approved for the loan quicker, but it is often a lot cheaper than working with a traditional bank.