Personal loans have become highly popular since they are a better financing option for big purchases. Unlike credit cards, they also come with affordable interest rates. In addition, a personal loan allows individuals to have a well-organized repayment plan, whether it’s for consolidating debt, funding your next vacation, financing home improvement, or any other purpose.
You need to be well prepared before applying for a personal loan to ensure easy and quick loan application approval. For more information on personal loans in Ontario, visit this site.
Eligibility for a personal loan in Ontario
Whether you apply for a $1,000 or $10,000 personal loan, the lenders in Ontario follow uniform criteria to determine the loan eligibility of the individual. Before applying for a personal loan, it’s best to determine your eligibility based on the following areas.
Credit history and credit score
Your credit history and credit score are the most important deciding factors when approving a personal loan application. An individual’s credit score is based on their outstanding debt debts, payment history, credit history, and other related factors. A score of 650 or above is considered excellent. You can easily get a personal loan at a low interest if you have a good credit score.
Source of income
You must have a stable earning source to get a personal loan in Ontario. It assures lenders that you are capable of giving monthly repayments on time. The minimum income requirements may vary from lender to lender. Though you may find some lenient lenders, most of them have strict annual or monthly income requirements.
From banks to online lenders, all personal loan providers need confirmation that you have sufficient income for repaying the loan amount. In the case of unemployed individuals, lenders accept applications of applicants who receive government benefits or get some money in the form of a pension.
Decide between a secured or unsecured loan
Secured and unsecured loans have different interest rates. In the case of the former, you’ll need to put any of your assets as collateral against the loan. In case of defaults, the loan amount will be recovered by selling that asset. On the positive side, the interest rates of secured loans are comparatively lower. In the case of unsecured personal loans, lenders in Ontario will weigh your credibility and repayment capability before approving your application.
Your Debt-to-income (DTI) ratio is another crucial element that’s considered when calculating the credit score. The ratio is the sum of all the monthly debts against their monthly income. Low DTI means high chances of personal loan application approval.
How to get a Personal Loan in Ontario?
Getting a personal loan isn’t as difficult as it may seem. Follow the process mentioned below for easy and quick application approval.
1. Determine the reasons for personal loan requirement
Before looking for potential personal loan providers, it’s important to figure out why you need to sign up for a personal loan. Plus, determine what amount of loan will be sufficient to meet your financial needs. For example, events like home renovation and weddings require a large amount of money, whereas small expenses like vehicle repair are a few hundred dollars.
2. Check your loan eligibility
After having a clear idea of how much money is needed for your financial requirements, the next thing is to check your eligibility. First, visit the bank’s official site or personal loan provider to check the eligibility criteria.
3. Calculate the interest and monthly installments
The online EMI tool is the easiest way to calculate the approx monthly loan repayments amount. You can modify the tenure and interest rates when calculating the monthly installments. It will help you find the monthly installments that best fit your monthly income. Don’t forget to check the terms and conditions of the personal loan at this step.
4. Submit your application
After deciding on the personal provider, the next step is to submit a personal loan application to the lender. The completed form can be submitted either online or offline.
5. Submit the necessary documents
Arrange the documents required for approval of the personal loan and submit them with the loan application form. Generally, copies of address proof, ID proof, and income proof (such as IT returns, salary slips, or bank statements) are required for a personal loan in Ontario. When the entire process is completed, wait for the remittance of funds to your account. It is usually done within 24 hours of application approval.
What interest is charged for a personal loan in Ontario?
Personal loan interest rates may range anywhere between 2% to 47%. However, the maximum interest rate on personal loans in Ontario is 60%. Note that the rate of interest rate depends on several factors like income, credit score, type of loan, credit history, loan amount, and debt loan term. Online loan providers have flexible terms and conditions but charge higher interest rates than credit unions and banks.
What is the minimum credit score for personal loan application approval in Ontario?
Individuals with a minimum credit score of 500-600 are eligible for a personal loan in Ontario. Some loan providers give credit to individuals with a credit score of 300 or lower, but they charge a high-interest rate. So it’s best to compare your options and find the best deal according to your income and financial situation.
The best thing about a personal loan is that individuals with zero credit or bad credit can get personal loan approval. You can easily apply for the loan online and provide all relevant info to the loan provider. If the lender is satisfied with the authenticity of the documents, you may get the approval within 24 hours of loan application submission.
Besides, credit checks are also a crucial element that affects the approval process of personal loans in Ontario. Lenders that provide personal loans without any credit checks are probably a scam. The repayment terms of personal loans can be anywhere between 6 months to 10 years, depending on the loan amount and time needed by the borrower to repay the loan.