Long-term loans are great because they offer low-interest rates and flexible repayment terms. However, not everyone qualifies for these types of loans.
To qualify for a long-term loan, you must meet specific requirements. These include having enough income, proving that you will make monthly payments, and showing that you have a steady job with a company that pays well.
If you do everything right, you should get approved for a long-term loan. But how do you find the best ones? This article reviews different long-term loans available in Canada. It also gives tips on choosing the best one for you.
What is a Long-Term Loan?
The requirements of long-term personal loans vary from lender to lender, but typically, lenders will want to see that you are a Canadian resident and are at least the age of majority in your home province. In addition, you usually need good or excellent credit to qualify for a long-term personal loan. If you have a credit score of over 670–what lenders consider good credit–you may find it easier to be eligible for low enough rates and loan amounts that make a personal loan with a longer term worthwhile. Even if you do qualify for a personal loan with poor credit or some other factor that increases your risk in a lender’s eyes, the APR you are offered could be higher.
Where Do I get the lowest rates on Long-Term Loans?
The lowest rates available generally require excellent credit and, for some lenders, can be reserved for specific loan purposes and shorter loan terms. Some lenders will also offer lower rates for larger loan amounts to compensate for higher costs over longer terms.
There is also more time for the fluctuation in the interest rates on variable loans, making repayments even less predictable than on variable loans with shorter terms. Fixed-rate loans have fixed amounts of payments, whereas variable-rate loans have payments that fluctuate depending on the lending market.
Long-Term Loan vs Short-Term Loan
While the interest rates are considerably higher in short-term loans, the interest paid is almost half what you would pay on a long-term loan in Canada. The lower your credit score, the higher the interest rate, which may make the monthly payment of the long-term loan unaffordable.
Lenders look at your credit score.
If you carry around too much debt, you are negatively impacting your credit score, and the chances of getting approved for a mortgage or a long-term loan are also lower. That is why finding a lender who can give you a long-term loan without checking your credit will be hard. Although having a poor credit score is still not desired, plenty of lenders and creditors can and will give you the type of long-term loans and credit products you need.
Today, Canadians in need of a loan with a poor credit score can turn to an array of private lenders in the country for a personal loan. Canadians struggling with poor credit can turn to Loans Canada, an indirect lender that helps connect prospective borrowers to some of the best bad credit lenders in the country, to get a break. Unlike banks, which typically lend money only to applicants with strong credit scores and flawless financial histories, alternative lenders in Canada will generally take your bad credit loan application. Alternative lenders charge higher interest rates and fees for personal loans with poor credit in this country than banks, as they take on more risk when approving your loan.
Can You Get A Long-Term Loan In Canada With Bad Credit?
There are a few lenders who do offer loans to people with poor credit – just be aware they are probably going to have higher interest rates. Some lenders may charge exorbitant rates, so always look at the lenders’ max interest rates before applying for the loan.
If you have credit problems, high debt-to-income ratios or any other red flags lenders are looking for; you may struggle to qualify for a loan. You can borrow up to $15,000 for unsecured bad credit personal loans or up to $25,000 if you use home equity as collateral to back up your loan. For example, for a $10,000 loan with a three-year payback term, a 7.99 percent interest rate, a $350 origination fee, and an 11.51 percent APR, borrowers would get $9,650 when they finance the loan by paying $313.32 in 36 monthly payments.
Benefits Of A Long-Term Loan
Assuming all payments are made on time, and all terms and conditions of the loan contract are fully observed, as well as any discount programs included in the APR/interest rate over the lifetime of a $10,000 loan, the borrower would pay $11,279.43. You can calculate your loan total by multiplying your payments by the number of payments over your terms. For example, the total interest cost for a 60-month loan is over eight times that of 12 months.
You can be allowed to make additional payments or repay your loan before the term ends without a penalty. With this loan, your goals are the same as the last, to make all of your payments on time and to build up your credit score so that eventually, you will get approved for that long-term loan you have been wanting. Once you have improved your credit with your bridge loan, you may want to refinance with a B-lender.
Alternatives to Long-Term Loans in Canada
Those who cannot afford a lump sum to purchase a car or any other transportation type choose this loan. However, you might have to pay to activate and use the card if you decide to get the loan with a prepaid card. You can also consider getting a secured loan (which requires collateral) for better terms. Another option is borrowing money from a friend or family member since those individuals would not be able to run a credit check while giving you a loan, and they might not care about your credit score. To determine the best no-credit-check loans, WalletHub editors reviewed offers from some of the largest lenders on the market. By taking the time to research loans that best suit your situation, you may even be able to save hundreds (sometimes thousands) in interest and fees over the life of the loan.
The more creditworthy applicants might be eligible for lower rates, whereas longer-term loans may carry higher rates. Therefore, actual rates may differ from those advertised and shown depending on lenders’ eligibility criteria, including credit score, loan amount, length of the loan, credit utilization, and history. In addition, they will vary depending upon the loan purpose.
LendDirect is one of the niche lenders offering unsecured personal loan products, in which borrowers may borrow up to $15,000 over time on unlimited, no-fee payday loans. Personal loans are available through mainstream lenders like banks and credit unions and alternative lenders like payday lenders, title loan companies, private lenders, and pawn shops.