Different Types of Loans in Canada

Are you looking for a loan in Canada? There are different loans that you can get because one type of loan cannot be used for all the transactions. Since there are so many choices, it gets challenging to choose the best-suited loan. This is why it is advised to do research before obtaining a loan.

To help you make an informed decision, we have talked about different types of loan available for Canadians. Have a look!

Personal Loans

The most common type of loan in Canada is personal loans. This loan can be further divided into two categories, unsecured loan and secured loan.

  • Unsecured Personal Loans- it is easy to acquire as you will require no collateral. Sometimes, the lender may even not check your credit score. In case they check credit score, they will be charging high-interest rates for borrowers with bad credit score. Mostly, the amount required for the loan is small, ranging from $100 to $500. You will have to pay back with the monthly installments.
  • Secured Personal Loans- in this loan, the borrower will have to provide an asset a collateral. This is why the secured personal loan has a lower interest rate. When taking this type of loan, it is better to borrow the amount that you need. If you will not be able to pay back the borrowed amount, the lender will collect the collateral as a payment. There is no limitation on the usage of this loan; you can use this type of loan for a wide range of purposes, from remodeling to buying a new car.

Consolidation Loans

This is the perfect solution for those people who find it difficult to repay their debt. If you have different debts, for instance, you have been using different credit cards. The best way to repay the debt is by consolidating the different payments into one payment. A remarkable thing about this loan is that the interest rate. It will be lower than the rate on your credit cards. This makes it easy to manage.

When you are consolidating your loans, you need to keep an eye for your budget. It means you need to ensure the installment payments are in accordance with your budget and that you can pay them without any difficulty.

If you are a student and want to consolidate your student loan, then the Canadian government offer a broad collection of aids and grants that will help consolidate payments of student loan.

Student Loans

This is a popular type of loan for students who want to continue their studies. It is offered to college students and their families. This type of loan can be only used for covering the cost of higher education. It can be further divided into categories, private student loans, and federal student loans.

For some people, a federal student loan is better as it has a low-interest rate and they have friendly repayment terms. However, some private lenders also provide low-interest rates and no strict repayment terms.

Auto Loans

Another most common type of loan is auto loans. This type of loan can be used for a specific purpose only. With the help of this loan, you can buy a vehicle. The only drawback of this loan is that you might lose your vehicle if you miss a payment. It is provided by banks and car dealerships.

Obtaining a loan from the dealership is simple but has a higher interest rate. however, this will cost you a lot more.

Small Business Loans

One of the best loans for entrepreneurs is small business loans. The main purpose of this loan is to help the small businesses expand or start their business. There are different lenders willing to provide small business loans. This loan has different options depending on the needs of various businesses.

Home Equity Loans

For homeowners, there is another loan at https://loanaway.com that will help them get a huge amount for their big projects. In case there is equity in your house, then your house is worth a lot more. You can use it to fund your big projects without any difficulty by taking home equity loan.

In this type of loan, the lender will keep the borrower’s home as collateral. This is the reason why the interest rates are lower than credit cards. This type of loan can be used for projects, such as home renovation, medical bills, education, expenses, credit card debt consolidation, and retirement income supplements.

A Final Word

When it comes to borrowing money, you have to make sure you understand the terms completely. The reason for borrowing money can be to pay emergency medical bills or to buy a house or to start a business. You must know what type of loan you are getting and get familiar with all the terms.