What is a Personal Loan?

A personal loan is a fixed amount of money (installment loan) that you borrow and repay within a fixed number of months. They can be secured (where you offer up collateral) or unsecured. At Fresh Start Financial, you can be approved to borrow money up to loan amounts of $15,000.

A personal loan is not a line of credit, as in, it is not revolving funding. When you’re approved for a personal loan, your lender gives you the full amount all at once and then, generally, within a month, you begin repayment. You are required to make fixed payment amount each month (or more than once a month, if you set it up that way) with a fixed interest percentage for a set term until the loan is paid in full.

What is a Personal Loan Used For?

A common reason is to consolidate and merge debt and pay all of them off at once with a personal loan. Some banks put stipulations on what you can use the funds for, but many do not (they’ll still ask on the application).

Other personal loan uses:
  1. home improvement loans and renovation loans,
  2. loans for moving expenses,
  3. vacation loans,
  4. wedding loans,
  5. medical loans,
  6. car repair loans,
  7. loans for rent,
  8. small car loans,
  9. funeral loans,
  10. or other bill payments in general.

How to Qualify for a Personal Loan

To qualify for a personal loan in Canada, you’ll need:

  1. To be a Canadian resident
  2. To be 18+
  3. Have an open bank account
  4. Proof of recurring income
  5. Proof of your expenses
  6. Proof of residence (recent rent or utility bill)

Some lenders will deny applications if you’ve been through collections, are new to credit, or a recent divorce or are even repaying student loans. At Fresh Start, you can apply regardless!

The Benefits of Applying for a Personal Loan with an Online Lender

The market is great for online-only lenders lenders in Canada. Perks include great interest rates, incredibly quick processing and funding times & the anonymity you may want. Not everyone likes walking into a bank to ask for money, so if this is a tough spot for you, or you just don't have time, looking at online lenders like Fresh Start is a great alternative.

Are There Tax Implications on a Personal Loan?

No, the Canada Revenue Agency does not consider loan funds income, unless the original loan was forgiven.

Do I Pick a Short-Term or Long-Term Repayment Loan Term?

That largely depends on your ability to repay the amount & pros and cons exist for both. Repayment lengths for personal loans usually fall within 9, 12, 24, 36, 48, or 60 months. Sometimes longer repayment periods are an option, though rare.

Shorter repayment times have very high monthly payments but then it’s over quickly and you don’t lose more money to interest.

Longer repayment times lower your monthly loan repayment by dividing the principal amount you borrowed by even more months. Yes, you get more time to repay which may seem like a “pro”, but you’ll end up paying more in interest over the course of your repayment term, making the cost of the loan higher. If you can afford to do this, then fine. But if you can’t, consider a shorter repayment period. Even a one-year repayment variation can make a difference if you’re borrowing several thousand dollars.

Your interest rate can be tied to your repayment period as well. You might get a lower interest rate if you finance the loan over a shorter period.

What is a Term Loan?

A personal term loan comes with an agreed upon repayment schedule and a fixed or floating interest rate. With a floating interest rate, the interest amount you pay will fluctuate month to month based on market changes. A short term loan is usually paid back in under 12 months, while a long term loan typically runs for up to 30 years.

Secured Personal Loan vs. Unsecured Personal Loan

Secured Personal Loans are backed collateral, while Unsecured Personal Loans rely on your credit score for approval. With a secured loan you can use your car or cash savings, as collateral. Secured loans are easier to get approved if you have bad credit, but if you default on your payments, the banks can seize the asset.

What are Personal Loan Interest Rates in Canada?

They vary considerably. At Fresh Start, our rates vary between 29.99%-46.96%. When it comes to the rate you’re given, it will be largely due to your credit history and the risk factor your lender gives you, which may be determined by a combination of your credit score & income-to-expense ratio.

What fees exist on a personal loan?

Fresh Start offers really simple personal loans - what you see is what you get. No maintenance or application fees. That said, if payments are made late or there are insufficient funds, those fees are out of our hands.

Are personal loans different from payday loans?

Yes. A payday loan is an extremely short and high-interest financing option and they do not offer very large amounts of money. The maximum most lenders offer in Canada is $1500 and they usually have to be repaid within 2 weeks (an average payroll cycle). Personal loans are the opposite - more money paid over more time.

Will bankruptcy affect my eligibility for a personal loan?

Not with Fresh Start! While it may affect your interest rate, we won’t automatically turn down your application just because you’ve had a bankruptcy. Everyone’s financial story is different, and we take a variety of factors into consideration.

Do personal loans affect my credit score?

Yes. Lenders will take a look at your credit report (soft or hard inquiry) to gather the information they need to make a lending decision. If you have relatively good credit (700+), a few points won’t hurt - especially if you’re not shopping around at different lenders. That said, if you don’t have a choice and have to shop around, experts say that it’s best to try and group your inquiries as tightly as possible because it will make it generally understood by lenders that you’re just shopping around for the best rate or best deal. As long as you make your payments on time, your credit rating can improve, especially if you have used the loan for Debt Consolidation.

What is the best Personal Loan option for you?

Fresh Start Financial offers a variety of personal loan options, custom-tailored to you and your unique financial situation.

Contact us today to see how we can help you!

Here’s how Fresh Start stacks up against other Personal Loan options:

  Fresh Start Pay Day Loans Bank Line of Credit Home Equity Loans Credit Card
Funds in as soon as 24 hours Yes Yes No No No
Funds in as soon as 24 hours Yes Yes No No No
Completely Online Yes No No No No
Builds your credit Yes No Yes Yes Yes
Complete From Home Yes No No No Yes
Borrow 1-15k Yes No Yes Yes Yes
Use the funds for whatever you want Yes Yes No No Yes
Collateral / Security Required No No No Yes No