Types of Lending
You are wanting to get a loan, you are probably trying to figure out what type of loan you should get, you are wanting to be sure you get the best interest rate, where do you start?
You should do some research before meeting with a lender, you want to be sure you understand what your options are for borrowing and get a general idea of what type of loan would most suit your borrowing needs.
Some of the most common types of loans in Canada are:
Personal Loans – a personal loan can either be a secured or unsecured loan, the difference is; an unsecured loan does not require collateral but will have higher interest rates. The rates are higher because the lender is taking a risk by lending you the money. Unsecured loans can be credit cards, small lines of credit and even car loans and the application process is usually quick and easy.
A secured loan is a loan where you will have some sort of collateral, ie: your house or car which will allow the lender to cover the debt if you miss payments and default on the loan. Types of secured loans are; Mortgage loans, large lines of credit, and personal loans. The application process for a secured loan is more difficult and takes longer to approve but will have a lower interest rate than an unsecured loan.
Mortgage loans – these types of loans have long terms with amortization periods, generally from 10 to 30 years. Mortgages are issued by a bank or mortgage lender and the application process is complicated as lenders will do an extensive background check.
Consolidation loans – many of us want to consolidate our loans, such as credit cards, car loans, and other bills, to get out of debt faster. By consolidating your loans, you can have one monthly payment that you can afford and at a lower interest rate than you would on your credit card or car loan.
Line of Credit – these are issued by a bank for financial institution and are an easy way to borrow money. Line of credits are a good way to have easy access to money and come with a lower interest rate then credit cards.
There are a few different types of line of credits you can apply for, those are: a secured or unsecured line of credit, home equity line of credit (HELOC), personal line of credit or a student line of credit.