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Personal loans in Alberta: the basics.

When you apply for a personal loan, you're borrowing a sum of money with the understanding that you will pay it back over an agreed-upon period of time via a series of installment payments. As part of this agreement, the sum of money that is repaid includes the original amount, as well as interest and fees. Interest and fees are how lenders make money on personal loans.

Personal loans come in different varieties: consumer loans, installment loans, and long-term financing plans are some of the sub-types of personal loans.

You can get a personal loan from traditional lenders (banks and credit unions) and also from alternative sources like private lenders. Depending on your needs, you can borrow up to $50,000 with a term of between six and 60 months.

Some personal loans are regulated by the province while others aren’t. That means terms and conditions can vary between lenders. We’ll cover the differences between loan types and where you can get a personal loan in Alberta.

Your questions about Alberta loans, answered.

How do I get a personal loan in Alberta?

In the past, options for personal loans were more limited. Your bank or credit union may have been your first, and final, destination. Today, there are options outside of traditional lenders: the bank’s biggest competitors are online personal loan companies. Because the marketplace is larger than before, lending companies may not all have the same borrowing criteria. Make sure you understand all the terms and conditions before you sign the agreement.

Non-bank lenders

What they are: These are private lenders who don’t require applicants to put up an asset as collateral. They may run a credit check as part of the process, but not always.

What to expect: These loans tend to be processed faster and have a lower credit score barrier for approval, though they may also come with higher interest rates.

What you need: Identification and proof of regular income.

Bank loans

What they are: A bank-provided loan.

What to expect: Unlike loan companies, banks have a more rigorous application process. Banks also favour clients with strong credit ratings.

What you need: Identification, proof of residency, and proof of regular income.

What types of personal loans can I get in Alberta?

Personal loans can be used for a variety of things: buying a car, doing home repairs or even to consolidate other debts and pay down other higher-interest loans.

There are two main types of personal loans: secured and unsecured.

Secured loans require an asset such as a car or a house. That way, if you can’t repay the loan, the lender can repossess that asset. Title loans are secured loans.

Unsecured loans don't require an asset to back it up, but if you can’t repay the loan, you risk being sued. The lender can also exercise the right of offset, which allows them to take money from other sources, like your savings account as payment.

Other loan types:

Fixed-rate loans: A fixed-rate means that the interest rate remains the same throughout the term of the loan, and the payments go toward a portion of the interest and principal. Fixed-rate mortgages, where the rate remains the same for a term of one to five years, are common.

Variable-rate loans: The interest rate on these loans fluctuates based on the prime lending rate. That means your monthly payment may vary based on the prime lending rate, which may be advantageous if we’re in a low-interest or negative interest rate economy.

Co-signer loans: If you have bad credit, or don’t have a substantial credit history, it can be difficult to get approved for a personal loan. In that case, a co-signer loan, also known as a guarantor loan, can help you get the money you need. Essentially, the co-signer is agreeing to pay off your debt in the event that you cannot. Loan approval is contingent on the financial health and creditworthiness of your guarantor. If you do not make payments, both you and your guarantor face penalties and both your credit scores will be impacted.

Debt consolidation loans: If you have multiple loans, you can get a debt consolidation loan that will combine them at a lower interest rate.

Payday loans: These loans are often used as a bridging solution between paycheques or as an emergency infusion of cash. They’re short-term loans for amounts usually less than $1,500. The interest rate on payday loans can be astronomical — rates as high as 400% — which makes them a poor choice for ongoing costs such as food, rent or bill payments. If you don’t have a financial plan to pay back a payday loan, you could find yourself spiralling deeper into debt. Regulators often warn against taking out payday loans, as the high-interest rates can make them difficult to pay off.

When should you apply for a personal loan in Alberta?

People take out personal loans for several reasons and it’s a popular option. As personal loans have an end date (the term by when you have to finish paying off your loan), many borrowers consider them for specific items or events as opposed to an open-ended borrowing option.:

Debt consolidation - Many people take out a personal loan to consolidate multiple debts into one debt. Ideally, that debt has a lower interest rate, which allows you to pay off your debt faster via one monthly payment.

Buy new items for the home or home renovations - If you’re doing home upgrades, a personal loan can help you finance the renovation including the purchase of appliances.

Paying for a wedding - While it’s often a better option to save for a wedding, a personal loan can be put towards paying for it.

To avoid using credit cards - You could use credit cards to pay for your item or event, but they have very high interest rates. A personal loan generally has lower interest rates, which makes it a more affordable option.

How are personal loans different from personal lines of credit?

Both personal loans and personal lines of credit require you to pay off the debt borrowed or accumulated. However, with a personal loan, you borrow a lump sum upfront and have to pay it off in instalments over a set term.

A personal line of credit is more a use-as-you-need it option. You get approved for a certain amount and you can use as much as you need on a monthly basis. Once you repay what you owe, you still have the personal line of credit to continue using. It’s a renewable form of borrowing, or what’s known as revolving credit.

How are personal loans regulated in Alberta?

As we’ve mentioned above, some personal loan providers are regulated at the provincial level. In Alberta, the Consumer Protection Act and Payday Loans Regulation regulates payday lenders, whether they have a store or operate online. Albertan payday lenders must have a PayDay Loan licence and adhere to certain rules and regulations.

What are the main advantages of a personal loan?

There are advantages and disadvantages to taking out a personal loan. Before you sign anything, make sure that you understand the interest rate, the terms and how you’re going to pay off the loan.

To sum things up:

  • The application and approval process for personal loans can be quick.
  • It’s possible to consolidate other debt with a new loan at a lower interest rate.
  • Personal loans offer predictable payment terms and schedules.