There are basically two types of loans available to consumers in Canada : secured loans Canada and unsecured loans Canada.
Difference between Secured and Unsecured Loans Canada
A secured loan is any loan that is provided to a borrower by a lender with some form of security against an asset, such as money or property. Security is required by many lenders in the event that the borrower defaults on the loan and is unable to repay it.
However, unsecured loans in Canada are loans that are not backed by an asset. These types of loans are generally used by borrowers who don’t have a lot of assets. Since the lender is taking on more risk, these loans typically have a higher interest rate than secured loans in Canada. The average interest rate on an unsecured loan is between 5% – 6%; however, this can vary depending on your credit score and the lender that is used.
Which Lenders Offer Unsecured Loans?
These loans tend to be for smaller amounts and can range from $250 to $10,000. The amount you are eligible for will depend on various factors. Such as your income, your credit history and any other debts you may have. Many large banks in Canada do not offer these types of loans, as they normally prefer to have some security provided by the lender. Many of these loans are actually offered to borrowers by private lenders.
What are the types of unsecured loans?
These loans basically fall into two categories. Payday loans and unsecured private loans.
A payday loan is a short-term loan that is repaid on the borrower’s next pay day, where the payment is automatically withdrawn from their bank account. This type of loan often has high interest rates and fees, and you may be penalized for missing a payment. However, they are often popular due to their convenience and easy access.
An unsecured private loan is a loan offered by a private lender. The interest rates on these loans tend to be a bit lower than what is charged for a payday loan; however, they are not as easy to get as the qualifications for eligibility are often tougher. In addition, the repayments are not automated. Before choosing Canada unsecured loans, ensure that the business is a legitimate lender and that you understand the terms and conditions of the contract.
You should also ensure that you are comfortable with the interest rate being charged and that you will be able to make the repayments on time to avoid late fees or possible damage to your credit score.