If you’re thinking about borrowing money, a credit card shouldn’t be your only go-to. Although credit cards have some advantages (i.e., rewards programs, emergency funds, etc.), taking out personal loans in Canada is another option. Ranging anywhere from $500 – $35,000, personal loans are rising among Canadian population, especially those who have bad credit and are trying to rebuild their credit score. If you’re applying for a bad credit personal loans in Canada, here are some things you should keep in mind.
Pros of Personal Loans:
- Fixed Term and Rate
Personal loans have a fixed term, which means that you are aware of the pay-off date. Compared to credit cards, which can take longer to pay off, personal loans typically take no longer than 5 years to repay. Moreover, your payment and interest rate on a personal loan remains constant throughout the entire course of the loan period, meaning no payment increase or added fees.
- Debt Consolidation
High interest rates are one of the main causes that keep people in debt for a long time. Debt consolidation with a personal loan will help simplify your financial life because you’ll only be required to pay one bill instead of several. Additionally, you will save more in the long run as your overall monthly payment will be lower.
- Credit Building
Consolidating your debt and paying off all of your credit balances will give you a good start at handling your finances and building up your credit score. Making regular payments on just one loan can boost your credit, and because you’ll only have one payment to track, you’ll be more likely to make that payment on time.
Cons of Personal Loans:
Personal loans are a great opportunity for you to rebuild your credit and alleviate debt, but if you can’t afford a certain monthly payment, you could fall into a deeper hole. Using your credit cards once you’ve paid them off with a loan will put you into a convoluted financial cycle, and it will take you a long time to pay everything off.
- Minor Debt
If you have small debt and decide to choose a personal loan to pay it off, be careful. Using a personal loan to consolidate a meager amount of debt might not save you enough in the long run.
- Higher Monthly Payments
The monthly payment on a personal loan depends on the amount you borrow, the interest rate, and the fixed term. Often, personal loan payments are lower than credit card payments, however sometimes they can be higher.
Personal loans are a quick source of cash, and they typically have rates lower than credit cards. If you want to get out of debt faster, and your research is up to date, a personal loan is a feasible option.
However, if you are looking for just a loan in Canada and your ultimate goal is to build your credit, car loan is the way to go. Get approved for a car loan here, or call +1855-550-5565 to speak with a credit specialist.