How to get the best loan in Canada?

The first thing to consider when contacting your potential lender is your credit score. As a rule, Canadian loan applicants with higher credit score are considered more reliable payers than those who have a lower credit score. Therefore, they usually qualify for the best interest rates that a lender has to offer. Before applying for a mortgage or a loan consolidation, the first thing to do is to check out your credit history. If you spot any inaccuracies, get in touch with your credit bureau and ask them to re-examine and correct your credit score. However, if your credit score is poor, it is best to raise it before you file an application for another loan.

Getting the best loan is as much a matter of careful planning and research, as it is a matter of negotiation. Once again, your credit score comes in handy – applicants with higher credit scores usually hold stronger positions when negotiating with their lending institution or bank. Keep in mind that most banks typically have options to adjust the interest rate on your loan in your favor, or waive certain service fees.

Being a diligent payer involves a careful monthly budgeting as well as good planning of your financial future. You probably know that you should not take more than you can carry. This rule of thumb is also valid for loans – you should not apply for a loan that will break your back in the long run.

If you are planning to apply for a mortgage, you have to consider how long you intend to stay in the house. If you plan to inhabit it for, say, five or six years, you will probably benefit more from a floating interest rate. On the other hand, if you plan to use your home for some twenty or more years, you may benefit more from the stability of a fixed interest rate.

When choosing your lender, you should compare fees as well as interest rates, plus the annual percentage rate of the loans they offer. If you are applying for a mortgage, you should ask your potential lender or, even better, each of the lenders you contact, to give you a formal “good faith estimate” of all fees you’ll incur with your loan. Thus, you will get a detailed breakdown of costs which is much more accurate than the overview that you’ll get with a mortgage offer. In addition, you should make sure that your Canadian lender understands your individual circumstance and specific financial needs. For instance, some lending institutions have developed special loan offers for applicants with poor credit, while others may have more diverse financing solutions for those who can afford relatively small payments. If you are planning to pay off your mortgage in advance, ask the lending institution for any prepayment penalties.

Sources: Dictionary of Financial Terms