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Personal loans in British Columbia: the basics.

British Columbia can be an expensive province to live in — especially if you’re in one of the major cities, such as Vancouver or Victoria.

It's one reason why you might need to take out a loan to meet your financial obligations.

But before you rush to apply for one, you should take some time to learn about what a personal loan is. We’re here to help. Read on as we take you through what you need to know about getting a personal loan in British Columbia.

Your questions about B.C. personal loans, answered.

Where should I get a personal loan in British Columbia?

There is no shortage of options when it comes to getting a personal loan in B.C. In the past, you’d have to walk into a bank branch and sit down with a representative.

Now, there are plenty of online options in addition to the traditional ones. The benefit of getting a personal loan online is that it’s fast and convenient. No need plan around the bank's limited hours. You can apply for a loan online 24/7.

That said, there are pros and cons to each of these routes, and it's important to know what you're signing up for when you apply for a personal loan.

First, depending on the type of loan you’re applying for, the process can be a longer one or a quick one. An unsecured loan usually has a faster approval process with less paperwork, because the loan isn’t backed up by collateral. However, these tend to be smaller loans with higher interest rates.

On the other hand, secured loans involve more paperwork and take more time, because the lender will have to verify the value of the asset you’re putting up as collateral — though secured loans tend to offer lower interest rates and allow you to borrow larger amounts.

Now, let’s take a look at the various lenders and what you should know.

Private lenders.

What they are: Many private online lenders specialize in lending to people with poor credit (those with a credit score below 574). Banks will often deny their applications, viewing them as higher risk. As a result, interest rates from private lenders tend to be higher, though they will often be more willing to lend to those with no or bad credit histories.

What to expect: If you have bad credit and you’re seeking out a loan with an alternative or online lender, expect to pay higher interest rates. However, many of these lenders also offer loans to those with good credit, allowing you to get competitive interest rates and compare your options.

What you need: Depending on the type of loan you’re getting, you should know or have the following items:

  • Your credit score.
  • A valid bank account with a Canadian financial institution.
  • A working email address.
  • Your personal information (address, employer, etc.).
  • You must be a Canadian citizen or permanent resident.
  • Information about any asset you’re putting up for collateral (such as a vehicle invoice or assessed price).

Bank loans

What they are: Bank loans are both secured and unsecured personal loans mainly geared towards those with fair or better credit scores (starting at 575 and above). The benefit of a bank is that they have branches you can walk into if you prefer to handle financial matters face-to-face.

What to expect: Banks offer loans online, over the phone, or through a physical bank branch. If you have fair, good or excellent credit, you can expect to qualify for a loan at these institutions. Unfortunately, banks are reluctant to lend to those with bad or no credit histories.

What you need: The information requirements are the same as above. Make sure to bring the following:

  • Your credit score.
  • A valid bank account with a Canadian financial institution.
  • A working email address.
  • Your personal information (address, employer, etc.).
  • You must be a Canadian citizen or permanent resident.
  • Information about any asset you’re putting up for collateral (such as a vehicle invoice or assessed price).

What types of personal loans can I get in British Columbia?

There are two main types of personal loans available, and there are pros and cons to each.

Secured loans

These types of loans require you to put up a valuable item that the lender can repossess if you fail to pay your loan on time. This can be a home, a car, or anything else that the lender deems of sufficient value. These loans require more paperwork, however, and take longer to be approved. The lender will take time to verify that you own the asset and that it’s worth what you say it is.

Unsecured

These loans are not backed by any asset, but as a result, they are often for smaller amounts and carry higher interest rates. However, their approval process is faster. If you need money quickly, unsecured loans are a good bet.

Other loan types:

Fixed-rate loans

Fixed-rate loans carry the same interest rate for the length of your term, from when you get your loan to the time you pay it off. While interest rates for fixed products tend to be higher, they offer you security from fluctuating rates that can increase your regular payment.

Variable-rate loans

Unlike fixed loans, variable loans can have changing interest rates. This will benefit you when interest rates are falling but will cost you when they rise. The benefit to these products is that they start off with lower rates than their counterparts, and if you’re comfortable with risk, they offer the potential for paying less interest in the end.

Debt consolidation loans

These are personal loans designed with the goal of getting all of your different loans, such as credit cards or car loans, into a single loan. They can offer better interest rates than what you’re currently paying and make regular payments easier to manage.

Co-signer loans

These loans involve having another person registered on the loan, potentially allowing you to borrow more money and with lower interest rates. That’s because the lender now has a guarantee that they'll get their money back: if you can’t pay the loan, they have someone else they can go after to get their money (the co-signer).

Payday loans

According to Consumer Protection B.C., these are short-term loans that are capped at $1,500. The province has brought in new rules that mandate you can’t be charged more than $15 for every $100 you borrow, which includes charges and fees. A loan also cannot be more than 50% of your paycheque. Finally, these loans must be repaid within 62 days.

When should you apply for a personal loan in British Columbia?

Canadians are carrying a lot of debt. Before you take on more, make sure that you really need a personal loan. Here are some situations where a personal loan might make sense.

Home renovations: Because this is a one-time cost with a planned start and end date, it makes sense to get a personal loan over something like a line of credit, where you might be tempted to tap into the money again.

Tuition: Like renovations, this is a fixed cost and it might make sense to get a personal loan to pay for tuition, as long as the interest rate is better than the alternatives.

Car loan: If you’re buying a car, you might compare the rates on personal loans to what the dealership is offering you to ensure you’re getting the best deal. Sometimes a personal loan offers a better interest rate.

Debt consolidation: If you have multiple debts on different credit cards, it might make sense to get a personal loan with a lower interest rate to pay them all off and lower your monthly payments.

To cover temporary costs: If you find yourself short of money because of an unexpected expense, it might make sense to take out a personal loan to fill the gap. Make sure you sit down and look at your finances beforehand, and never take out a personal loan you can’t afford to pay back.

How are personal loans different from personal lines of credit?

Personal loans are installment loans that require you to pay off the full amount by a fixed date. Your lender sits down and explains the loan contract to you, such as the interest rate, monthly payment, and the date at which the loan must be repaid. Personal loans are handed out as a lump sum amount and you pay interest on the entire amount, whether you use it or not.

Personal lines of credit are a form of revolving debt, like credit cards. You are offered an amount that you can borrow from, and only pay interest on the amount you use. If you feel you can benefit from constantly having money available to you to borrow, but want to pay lower interest rates than a credit card, a line of credit might make sense for you. The downside is they can encourage reckless spending, as you may be tempted to use the money if it’s available.

How are personal loans regulated in British Columbia?

Who regulates personal loans in B.C. depends on what lender you are getting a loan from. The B.C. Financial Services Authority (which was known as the Financial Institutions Commission before Nov. 1, 2019), regulates credit unions, trust companies, mortgage brokers and the Credit Union Deposit Corporation. Banks in B.C. are regulated by the Office of the Superintendent of Financial Institutions.

Payday loans, meanwhile, are regulated by Consumer Protection B.C. It’s important to know who the lender you’re lending from is regulated by, so you can make the appropriate complaint if necessary.

B.C. has recently sought to toughen its rules around payday loans. As of Sept. 1, 2018, the maximum fees on payday loans are $15 for every $100 borrowed. Payday loans in B.C. must be repaid 62 days from the day the term starts.

What are the main advantages of a personal loan?

The advantage of a personal loan is that they offer you a way to quickly get a loan and have a clear start and end date. If you have a haphazard approach to debt, personal loans can add some discipline to your financial regime.

As well, given that there are both secured and unsecured loans available, personal loans afford you some flexibility that other loans might not. If you need a loan quickly, getting an unsecured personal loan can be a great solution. Similarly, if you want a bigger loan with a lower interest rate, you can go with a secured loan.

Here at LowestRates.ca, can help you get a quote for a personal loan based on your unique circumstances. The process is quick, easy, and free to use.