The demand of personal loans continue to rise over alternative borrowing options . This is mostly because of their competitive interest rates compared to other kinds of consumer borrowing methods for instance “credit cards”.

Common types of personal loans include unsecured, fixed- and variable-rate, and debt consolidation loans. The best choice depends on your own preferences considering the circumstances you are in.

A fixed rate loan uses the same interest rate for the whole loan term, giving borrowers clear monthly payments. On the other hand, variable-rate loans have fluctuating interest rates making it difficult for borrowers to predictable monthly payments.

Debt consolidation is when borrowers combine debts from several creditors, then take out a single loan to pay them all, usually at a reduced interest rate and lower monthly payment.

Secured Loan: In a secured personal loan, the lenders require a valuable asset as collateral in case of defaults in loan repayment. You can use your car, house, bank savings account or any fairly valued asset as collateral security to the loan taken.

Unsecured Loan: An unsecured loan does not require collateral. Therefore, financial companies charge a higher interest rate because of the increased risk of default.

In this article we help you pick the best loan that will suit your personal needs and lifestyle. Most importantly, lets look at aspects you should consider when choosing a loan:

1. Interest rate

The interest rate is the most important aspect to look at because its used in calculating your monthly payments. Our recommended financial companies below have interest rates from as little as 3%. A good deal will be the one with the lowest interest rate.

2. Fees and Charges

Personal loans have origination fees, and some hidden costs. Actually some lenders make most of their profits from these charges. They might offer a low interest rate just to attract you while ripping you off with their hidden fees. Therefore, get clarity from the lender concerning any hidden fees that you might have to pay.

3. Loan term

Long repayment period (loan term) lowers your monthly payment obligation. While this may look attractive, it increases the total amount paid during the loan course.

Choosing a loan with a short repayment period may require you to pay a high monthly amount but will save you more in the long run. By the time you finish repayment of your loan you will realize how much you have saved from monthly service fees and interest.

4. Early repayment

 Staying with a loan obligation can be tiring; sometimes you would want to repay the loan as quick as you can. Most companies have penalty on early loan repayments. Clearly you might want to consider getting loan from a lender that will allow you to make payments quicker whenever you have means. This might save you on other costs like the monthly service fees.

Best personal loans:

1. Borrowell

Today over a million Canadians have joined Borrowell, the company has a reputation of being the first to offer free credit scores and reports. Headquartered in Toronto, Borrowell doesn’t merely offer up-to $35 000 loans but goes a step further and guard clients to make great credit decisions.

How it works:

  • Offers maximums of 3-year to 5-year loan terms
  • Interest rates of 5.6% to 29.19% with an average of 11% to 12%
  • Charges an origination fee of 1% – 5% of final loan balance
  • There are no charges or penalties for early loan repayment installments
  • Partnered with Equifax, therefore your credit score will be improved

Eligible criteria:

  • A credit score of 660 or higher
  • Atleast $20 000 annual income
  • Credit history
  • A serviceable Debt Service Ratio

2. Ferratum loans

The Ferratum group has international operations, available in about 25 countries including Canada. Ferratum offers loans from $500 to $15 000, with rates starting from 18.9%

How it works:

  • The application process takes 10 minutes
  • Deposits made in an hour after approval
  • Loan term from 6 to 60 months
  • There are no penalties for early pay off of loan

Eligible criteria:

  • You are actively working, receiving a net income of $2,000 per month or greater.
  • Three months recent pay slip
  • A credit score 600 and up
  • You have no late payment history (90 days), overdraft, or insufficient funds fees
  • There is a 7 years bankruptcy check to determine financial health
  • Your debt-to-income ratio (DTI) must be less than 40%. DTI compares how much you owe each month to how much you earn.

3. Loanme

Loanme personal loans are up for application 7 days a week. Their 24/7 online approach makes it easy for you to apply at anytime even from the comfort of your home. Loans start from $600 to $100 000 at competitive interest rates.

How it works:

  • The Proof of self employment (if applicable) required
  • Amount: $600 – $100,000
  • After approval loans can be funded within 4 hours
  • Amounts over $10 000 are not paid during weekends
  • Loanme does not charge penalties on loans paid off early, instead paying early reduces interest on the loan

Eligible criteria:

  • 18 Years of Age and above
  • Checking Account
  • Online Banking    
  • Voided Check
  • Recent Paystub
  • Driver’s License (or valid ID)
  • Proof of Self Employment

4. 514 Loans

514 loans is an online financial service provider. Partnered with licensed private lenders, to provide less expensive and flexible short term financial solutions.

How it works:

  • Applicants with bad or poor credit profiles can also apply
  • Applications can be done and completed online
  • $300 borrowed over 3 months on a bi-weekly payment schedule, will cost the borrower 6 payments of approximately $75. The total amount reimbursed is roughly $450.00. This includes all membership fees as well as Interest and capital.
  • Annual percentage rate of 22% to 32%

Eligible criteria:

  • Atleast 18 years of age
  • Canadian citizens only
  • Full time employment
  • Active bank account

5. Meridian

Meridian is the third largest credit union in Canada offering both secured and unsecured personal loans to Canadians.

How it works:

  • Online applications are now available
  • Loans up to an amount of $35 000
  • Competitive interest rates from 5.5%
  • Fixed interest rates, therefore fixed monthly payments
  • After loan approval, you receive the lump sum of money upfront

Eligible criteria:

  • Atleast 18 years of age
  • Canadian citizens only
  • Valid driver’s license or ID card
  • Applications open for employed and unemployed
  • Active bank account

6. Loans Canada

Loans Canada is not a lender itself, but has its verified partners who offer loans at competitive rates. The company matches your application with the best lender best fit to cater for your needs stated in the application.

How it works:

  • Loan from $500 to $50 000
  • Interest rates from 3%
  • Zero minimum credit score
  • Origination fees from 0.5% – 8% depending on lender
  • Loan term vary from 3 – 60 months
  • Loan funded with 48 hours

Eligible criteria:

  • Atleast 18 years of age
  • Canadian citizens only
  • Valid driver’s license or ID card
  • Both employed and unemployed can apply
  • Active bank account

7. Loan Connect

Loan Connect (just like Loans Canada) does not lend money itself. Instead, it connects borrowers with local lending institutions. Their system enables you to connect to dozens of lenders from a single application.

How it works:

  • Loans from $500 to $50 000
  • Interest rates from 4.6%
  • Zero minimum credit score
  • Origination fees from 0.5% – 8% depending on lender
  • Loan term vary from 6 – 60 months
  • Loan funded with 12 hours

Eligible criteria:

  • Atleast 18 years of age
  • Canadian citizens only
  • Valid driver’s license or ID card
  • Both employed and unemployed can apply
  • Active bank account

Personal loans can definitely be a better way to borrow than credit cards and credit card borrowing. However taking on multiple loans at one time can still come at a cost. Be sure you’re smart about your borrowing and research all of your options to pick the deal that will suit your circumstances.

By Parddon Khumalo

Parddon Khumalo is personal finance expert. His primary focus is banking but also tends to venture into wealth creation, fintech and data analytics.

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