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Personal loans in Quebec: the basics.

You may want to get a personal loan to help pay for a major purchase (such as a car), top up your RRSP, renovate your home, start a business, or consolidate your debt.

Personal loans usually have a fixed or a variable rate and must be paid back within a certain period of time (typically one to five years). Loan payments are made monthly, and the payment consists of the money owed along with interest.

Most people think of traditional lenders — such as banks and credit unions — when they consider getting a personal loan. However, the number of online personal loan companies has flourished in recent years. You can now apply and get approved for a loan without leaving your house.

Read on to learn about how to get a loan, the kinds of loans available, and when it makes sense to apply for one.

Your question about Quebec personal loans, answered.

How do I get a personal loan in Quebec?

In the past, you had to go to the bank and meet with someone in order to apply for a loan. Now, many lenders let you apply over the phone or online. Most lenders will check your credit when you make an application.

Non-bank lenders

What they are: These types of lenders aren’t banks or credit unions. They’re often companies you’ve seen ads for online or on TV that offer consumer loans. This is the kind of lender that can match you up with.

What to expect: The application process is fairly simple. You just need to provide some information about yourself and you’re all set to apply.

What you need: You usually need to provide your name, address, phone number, income, date of birth, annual income, employment status, housing or rental costs, other monthly expenses, and what you’ll be doing with the loan proceeds (debt consolidation, wedding expenses, etc.). Lenders may or may not do a full credit check when you make the application.

Banks and credit unions

What they are: These are the more familiar lenders, which often have branches in your city, province, and across the country.

What to expect: The loan application process is fairly straightforward. You can either apply online, over the phone or in-person at your nearest branch.

What you need: Proof of income (usually for amounts above $5,000), a bank account, and a permanent address.

What types of personal loans can I get in Quebec?

While you can get a personal loan for a number of different purposes, there are two categories of loans: secured and unsecured. These are both forms of consumer debt like credit cards and home equity lines of credit. According to Statistics Canada, Canadians had $2.25 trillion of debt in the second quarter of 2019 — $782.9 billion of which was consumer credit and non-mortgage loans.

Secured loans

Getting a secured loan usually means you can borrow a larger amount because your assets (such as a home, car, or investments) are used as collateral. This will result in a lower interest rate than an unsecured loan because the lender can take possession of the collateral in the event you default on your payments.

The time it takes to get a secured loan will often take longer than an unsecured loan because the assets used as collateral need to be verified and appraised by the lender. These types of loans are more likely to be offered by banks and credit unions.

Unsecured loans

An unsecured loan can often be harder unless you have a high credit score. Also, the interest rate will likely be higher than a secured loan because it won’t be secured by any assets.

The approval process for an unsecured loan often doesn’t take as long and there’s less paperwork to do. Alternative lenders usually provide this type of loan as do most financial institutions.

Other loan types:

Fixed-rate loans

The interest rate on a fixed-rate loan remains the same for the entire term of the loan. The payments on this type of loan will be the same every month. The interest rate on a fixed-rate loan will generally be higher than a variable-rate loan.

Variable-rate loans

The interest rate on a variable-rate loan will change if the prime rate changes. If interest rates fall, more of your payment will go towards your principal. However, more of your payment will go towards interest if the prime rate increases. Also, your amortization period will increase and your regular payment may rise.

Debt consolidation loans

A debt consolidation loan is used to pay off some or all of your non-mortgage debt, which is usually at a lower rate than what you’re currently paying. For example, if you’re carrying a balance on a few credit cards, you can pay off both cards with a debt consolidation loan and pay less interest. This means you only have to worry about one monthly payment instead of multiple payments.

Co-signer loans

If you don’t have a strong credit history or a sufficient income, you can get someone (usually a parent, sibling, or other relative) to co-sign your loan. In the event that you won’t be able to make a payment, they will be responsible for paying off the loan. The co-signer will need to have a strong credit history in order to get the loan.

Payday loans

People who are desperate for cash turn to payday loans. These are short-term loans that usually have to be paid back when you get your next paycheque. There’s a fee charged each time you take out a loan, which will often be the equivalent of a triple digit annual interest rate. They can be very dangerous if you don’t pay the loan back on time because you’ll be charged additional fees on a small amount of money.

When should you apply for a personal loan in Quebec?

There are a number of reasons why people take out a personal loan. It can be used for a major purchase or expense. Here are some of the reasons why people get a loan:

Consolidating debt - No one likes to pay an annual interest rate of 20% on their credit card balance. That’s why many Canadians choose to get a consolidation loan so they can pay off their high-interest debt. Some people can get stuck in a debt trap if they end up running up a balance on the cards they just paid off.

Home renovations - It can be difficult to live with a 1980s-style kitchen in 2019. That’s why many homeowners opt to renovate, and a loan is a perfect way to get that done. Homestars estimates that the average kitchen renovation is $30,944 in Canada, which is the kind of money most people likely haven’t saved.

Paying for a wedding - Gone are the days when the bride’s family paid for the wedding. In the 21st century, many couples are paying for their own wedding even if they don’t have enough money saved to pay for everything. According to Wedding Wire, the average cost of a wedding in 2019 is $29,450.

RRSP top-up - You know how you can contribute 18% of your earned income to an RRSP every year until you turn 71? Well, most Canadians don’t. About 24.6 million Canadians had nearly $1.1 trillion in unused RRSP contribution room in 2016 (the latest statistics available), according to Statistics Canada.

How are personal loans different from personal lines of credit?

Using a personal line of credit, a personal loan allows you to borrow a certain amount of money. You also have to pay it back within a specific period of time. Most loans require you to pay interest plus principal, but there are some interest-only loans.

A personal line of credit is limited to a certain amount of money, but you can continue to use it for as long as you like. You can borrow as little or as much as you want up to your limit.

Interest is only charged on the amount used. There are lines of credit that require either minimum monthly payments or interest-only payments.

How are personal loans regulated in Quebec?

Personal loan providers are usually regulated either by the federal or provincial government. The Office of the Superintendent of Financial Institutions is a federal government agency that regulates banks. Quebec-based credit unions, known as caisses populaires in the province, are regulated by the Autorité des marchés financiers.

The province’s Consumer Protection Act requires payday lenders to have a license to operate in Quebec. However, licenses will only be granted if the lender charges less than a 35% annual interest rate. The payday loan business in the province has effectively been killed because of the cap. In Ontario, for example, the annual interest rate can be nearly 800%.

What are the main advantages of a personal loan?

Taking out a personal loan has its advantages compared to other types of loans, especially if it’s one you can afford. Here are some of the biggest advantages:

  • The interest rate on a debt consolidation loan is much lower than the rate on a credit card if you carry a balance.
  • You’re forced to pay back your debt in monthly installments unlike a line of credit.
  • A personal loan can help boost your credit score because it’s a different type of credit.
  • Getting a personal loan to pay off credit card debt and reduce your credit utilization ratio, which can also help boost your score.