How to Get a Personal Loan in Ontario

Just like many other provinces, a few things are required on your loan application in order to get approved for personal loans in Ontario. Of course, this ultimately depends on the type of loan you are applying for as well. Each type of loan will require a few different things, but, in general, they require:

• A hard credit check
• Proof of Income
• Proof of Address
• Valid Government ID

Once the personal loan providers receive this information, they’ll then go over your credit report and assess your financial situation. From there, depending on your loan options, you’ll receive long term loans or short term loans, your loan amount and the payment frequency for the loan. With low credit scores, you’re more likely to get short loan terms. However, some alternative lenders, also known as online lenders, offer online personal loans that will improve your credit score when you make on time payments and improve your payment history.

How Much You Can Get for a Personal Loan in Ontario

Once you have applied for a personal loan, the lender will take these factors into account before giving you an offer. The average personal loan (also known as an installment loan) in Ontario ranges anywhere from $500 to $100,000, but it can be more depending on the situation. It also depends on what kind of personal loan you are getting.

How Much You Can Get With a Unsecured Loan

Most unsecured personal loans range anywhere from $500-$50,000, although it is recommended that you do not borrow any more than you need. Lenders will give you the maximum amount you are approved for, and you can pick the amount that works for you before the funds get transferred into your bank account. 

 How Much You Can Get With a Secured Loan

Oftentimes, you can get higher loan amounts with a secured loan, but that mostly depends on the asset you are using as collateral. There are a few different types of secured loans, and with these come different loan amounts. 

• Home Equity Loan – These types of loans can sometimes be way over 100,000, depending on the value of your home. The general rule with home equity loans is that you can borrow up to 80% of the value of your home minus whatever you owe on the mortgage. For example, If your house is worth $800,000 and you still owe $300,000, you can borrow up to 80% of $500,000, which is about $400,000.
• Credit builder – loan These loans are mostly used for those with poor credit; you pay back the amount you owe before you receive it. They aren’t ideal if you need money, but they are a great way to build your credit to receive money in the future. 
• Vehicle title loan – For this type of loan, if you put your car up for collateral, you can receive anywhere from 25%-50% of the worth of the vehicle. For example, a $20,000 car could get you a loan anywhere from $500-$10,000. This is the same for traditional car loans. 
• Pawn shop loans – These are similar to payday loans. The interest rate can be over 300%, and the amount depends on the collateral being pawned. 
• Loans secured by savings/investments – This is a type of loan that is often used for people who have a limited credit history, and the amount varies depending on the loan/investment amount that is being used as collateral.

Credit Score Needed for a Personal Loan

The credit score needed for a personal loan for Ontario resident really depends on the lender and the amount you are looking for. Traditional lenders like banks and credit unions require you to have good credit. Since credit can range anywhere from 300- to 900, a credit of 660 and up is considered to be good credit. Good credit will often get a higher loan amount and a lower interest rate. 

Online lenders often accept credit scores as low as 500 and sometimes even lower. Most payday loan companies don’t even check your credit as long as you can prove your income. Usually, when it coms to bad credit loans, your debt-to-income ratio, gross monthly income and overall financial situation matter more than your credit score. 

Whenever a lender does a credit check, in order to get you approved for a loan, a hard credit check has to be done. While a soft credit check only shows a rough indication of your credit score, a hard check shows your financial history, such as bad debt write-offs, collections, consumer proposals, and bankruptcy. 

Don’t worry, though; just because your credit check shows the credit mistakes you made in the past doesn’t mean you won’t get approved. You may not get as much money as needed, but as long as you make your payments consistently, you should get better approval the next time you borrow money, geting you closer to some of the best personal loans.

Monthly Payment Costs for a Personal Loan

Payments on a personal loan vary for everyone. It depends on the amount of the personal loan as well as the interest rate. The length of a personal loan can range anywhere from 9 months to 60 months and sometimes even longer. 

On average, the shorter the repayment period on a loan, the higher the loan payment, but it ultimately depends on your individual situation. Interest rates can go as high as 60%, depending on the lender, which also affects the cost of your monthly payments. 

For example, for a personal loan of $10,000 over a period of 60 months with an interest rate of 15%, the payments would be in the ballpark of $237.90, whereas the same amount over 60 months at 6.4% is around $195 per month. 

Now, let’s try these two situations over a shorter period of time. With an interest rate of 15% and a loan of $10,000 over 36 months, the estimated monthly payments would be $347. With an interest rate of 6.4% and the same parameters, the estimated monthly payments would be around $306.

As you can see, the payments vary depending on the circumstances. When going over the parameters of a loan with your lender, verify that you can afford the monthly payments and keep in mind that these payments are just for the loan and do not include any extra insurance or fees. There are also late payment fees to consider as well as prepayment fees or prepayment penalties if you want to pay off the loan early. Don’t be afraid to ask