There are plenty of reasons to apply for a personal loan, much like there is a large variety of personal loans. You may want to do some home repairs, buy a car, finance a wedding, pay off bad debt or credit card debt, or anything else.
In general, it is not difficult to get a personal loan if you are not after too much money. Most financial institutions will limit the amount to about $5,000, and the reason is that the loan you get is of the unsecured variety. With signature or unsecured loans, you don’t offer collateral to guarantee repayment meaning that lending more money is risky business for more lenders.
So, what are the requirements for obtaining a personal loan? First, you will need to present your personal information, which may be your driver’s license, along with your SIN. This information will be sufficient to obtain a credit report which will show your payment history and current debt load. While some lenders require an excellent credit score, others will accept lower scores. However, you will be offered a higher interest rate because you present risk for the lender.
If your income is very high, lenders will be willing to extend you a loan even if your debt load is considerable or your credit score is low. You will have an added advantage if you have worked for the same employer for a certain period of time, and your salary was continuously increasing.
Other requirements include not having defaulted on a bank account and not being currently delinquent on an account. If you have submitted an application, you may have to wait for 90 days before you do it again.
You may want to visit your local bank before looking anywhere else. The requirements for approval may be stricter, but you will be usually offered lower interest rates than those of independent lenders. You should take interest rates seriously because in some cases, you may pay more money in interest than what you borrowed. On the other hand, if you are considered a risky borrower, you will be offered high interest rates, and banks will not approve your application for a personal loan. Borrowers with good credit are in a better position. If this is your case, and you are still offered a high interest rate, try negotiating it to a more manageable level.
By being approved for a loan and paying it back on time, you will establish a good credit score. You may also think of applying for a couple of lines of credit, but over-leveraging is not a good idea. So, it is wise to keep a low balance on all cards that you have, which can be in the range of 10 percent. You should aim at a mix of installment and revolving loans, but avoid having multiple debts.