Bad credit and financing. Two words that virtually guarantee you will pay hefty interest rates once you apply for credit. If you want to know where you can get the right loan with the lowest interest rate, continue reading.
In the full world of lending, many companies specialize in lending to borrowers with less than stellar credit. Nevertheless, for the untrained eye, every lending institution looks the same and offers the same services. Unfortunately, if that’s what you think, you couldn’t be further from the truth.
BAD CREDIT AND FINANCING
Type A institutions like banks.
These institutions primarily cater to what they call prime clients. Prime clients are consumers that have stellar credit, stable employment and preferably assets. In terms of assets, we can include liquidity, a mortgage, investment products or the potential to obtain these. Unfortunately, there’s a high probability of denial of any credit application if your credit score is less than 670. Albeit, there’s a law in Canada that prohibits banks from discriminating clients; they do not have any obligation to provide credit products.
Moreover, when you open your bank account, the bank verifies your credit and allocates you a score. Consequently, if they deem it high enough, they will offer you all kinds of credit products, including overdraft protection. Occasionally, there’s a mandatory withholding period when you make an ATM cash or check deposit. Incidentally, that withholding period depends on that initial credit verification.
Bad credit? No financing.
In these establishments, lousy credit and financing do not bode well together. Most importantly, if there’s any wrongdoing, they can cancel all your accounts.
Nevertheless, the lower interest they charge is a compensation for keeping an outstanding credit profile. Typically, for either an unsecured loan or line of credit, the rate is between 4% and 12%. Accordingly, for a secured product, the bracket is much less because the banks have an asset as a guarantee.
For example, Tangerine Bank is a type of lender that caters to prime borrowers. Furthermore, if you’re in that category, they currently have an abundance of special offers on their lending and saving products. Because they mainly have an online presence, it allows them to offer excellent interest rates, whereas other banks do not. Compare the 1.85% Tangerine Bank provides for a savings account to the measly 0.01% that TD Bank presents.
BAD CREDIT AND FINANCING
Type B Institutions like LoanConnect.
In this category, the lending criteria are less stringent, and the interest rates are usually a bit higher. The target clientele has a credit score of less than 670, and a few hiccups in their credit report. In the financial jargon, that market is called subprime. Indeed, it’s the same term used to describe the 2008-2009 financial meltdown that left many people on the street.
Nonetheless, subprime describes a borrower that has dents in his credit, unstable employment and not many assets. Since banks have strict risk management policies in place, they leave a large swath of the population without proper options.
In comes Type B institutions with financial products that target subprime borrowers. As a consequence of lower federal legislation in this zone, it’s a bit like the wild west. Thus interest rates on unsecured loans start at 10% and reach more or less 60%. The latter is the highest legal rate an institution can charge a consumer in many Canadian provinces.
LoanConnect brings a solution.
Unlike many other lending companies, LoanConnect targets everybody. In truth, they lend money to people who have past bankruptcies, and borrowers currently in a consumer proposal.
Throughout my research, they proved to be the best personal loan lender in Canada apart from Type A firms.
They propose loans from $500 to $50000 and the borrower as up to 60 months to repay. Additionally, their interest rate is comparable to those of regular banks. Most notably, they start at 4.6% up to 46% for those with a more complicated credit history.
A loan with them will increase your credit score and eventually allow you to apply at Type A institutions. Furthermore, if you’re presently in a consumer proposal, a loan from LoanConnect can help you repay it quickly.
BAD CREDIT AND FINANCING
Type C institutions resemble payday loan companies.
Without question, you should stay away from Type C institutions. Most of them operate illegally and charge fraudulent interest rates that lock you in a vicious debt cycle. In this category, you can include all kinds of payday loan companies, regardless of their names.
How do you recognize a payday loan company? If their repayment schedule forces you to repay in less than one month, it’s a payday loan scheme. They usually advertise a low bi-weekly interest rate that equals to more than 300% annually. Thus, they charge illegal amounts in many Canadian provinces.
If you’re in a dire situation and do not have access to Type A lenders, please contact LoanConnect. Alternatively, they will provide you with the right solution.
What should you choose?
When you need financing, there are many factors you need to consider. One of the most important one is your debt ratio. Charter banks will not lend you anything if that ratio is more than 40%. However, LoanConnect will lend you up to a 60% debt ratio. For your convenience, here’s a quick way to calculate it. Take all your monthly debt payments and divide them by all your monthly revenues. The answer is your debt ratio.
I hope you found the information in this article useful.
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