One of the main concerns for anyone thinking about taking out a loan is the interest rate. Thus, in this article we explain everything you need to know about loan interest rates so that you can choose the lowest interest rate loans.
What are the loan interest rates?
Although most of us have an idea of what the loan interest rates are, it is important to be clear about their exact definition so that you can be sure you are choosing the most beneficial interests rates loan in Canada.
Thus, the interest rate is the money the lender charges the individual that is not part of the amount borrowed, which is calculated as a percentage, for example, 2% on the original amount. Thus, interest rates for bank loans usually vary according to the loan and the individual’s credit score, in fact, money may not be lent at all if you have a bad score.
On the other hand, there is the personal loan rate of interest. First of all, it should be clarified that personal loans are a type of closed credit generally offered by private individuals outside of large financial structures such as banks. Because of this, it is likely that the determination of the personal loan rate of interest differs from that of the bank and, in many cases, they do not ask for the credit score.
How do the interests rates of a personal loan in Canada work?
As already established, in principle, loan interest rates are calculated according to the factors determined by the lender, which must be made clear before the loan is granted. However, below, we will mention the most common ones for personal loan interest rates in Canada.
One of the main elements that influence loan interest rates is the credit score. However, it is common for people to have a bad credit score, either because they have just started their financial life or because of complex personal situations. Therefore, if you have a bad credit score, you may not be able to access credit or you may be charged very high loan interest rates.
Fortunately, it is now possible to find a personal loan rate of interest that does not take credit score into account, for example, Good Life Loan.
Amount of money borrowed
The amount of money borrowed is a factor that influences the vast majority of loan interest rates. This is because it is calculated through percentages, so, regardless of the percentage charged, it is clear that the greater the amount of money, the higher the interest rate.
Therefore, you should be clear about how much money you aspire to obtain and, if it is a high amount, look for the lowest interest rate loans in order to balance the expenses.
Duration of the loan
Another element that highly influences loan interest rates is how long it will take you to pay it back. There are long-term loans, such as a mortgage, and short-term loans, such as a credit card. As with the amount of money borrowed, the number of payments you have to make increases loan interest rates as it accumulates over time.
Also, lenders may decide to increase the percentage of the personal loan rate of interest if the individual requests very long repayment terms. However, the best option is to choose a personal lender that does not radically change the loan interest rates depending on the repayment time, in this case, we recommend Good Life Loan.
Use of collaterals
Some lenders, usually not personal lenders, use collateral to lower loan interest rates. However, this can be a double-edged sword.
Using collateral assets, for example, your car, allows the lender to take possession of them in case you are late with your payments, which implies a lower risk for them, however, it is a big risk for you.
If the amount is not too high, our recommendation is to go for an unsecured loan, i.e., one that does not use collateral. At Good Life Loan, you will never be asked for a co-signer or a collateral asset.
What is the best personal loan rate of interest?
Taking into account all the information provided, the best loan will depend largely on your specific needs and repayment capabilities. However, if your credit score is poor, it is very likely that if you receive loans, they will have a high interest rate.
Thus, our recommendation is to opt for a personal loan rate of interest that does not take into account the credit score but other elements such as the amount of money, the repayment time and your income. If you are a resident of Canada, Good Life Loan is an excellent option for quick loans with low interest rates and no credit score check. To get up to $1,500 in a matter of minutes, you can fill out the form here.