Having a credit profile in Canada makes you feel like standing at the shore with no means to cross the same. People with bad or no credit ratings in Canada are always at a disadvantageous run with not being able to apply for a personal loan because many lenders prevent such unfaithful borrowers to return the money.
But it’s not the end of the road for bad credit holders in Canada. Credit builder loan in Canada can help you save from loan rejection embarrassment and helps you save money after a substantial period of time.
What is a Credit Builder Loan in Canada?
A credit builder loan is a special financial offer for bad or no credit holders in Canada looking for a way to improve their scores. In general, traditional banks and many online loan lenders do not trust bad credit holders and prevent them for applying loans.
At such instances, credit building accounts or better known as Credit Building Account, Credit Savings Program or Credit Building Loan Canada, comes to your rescue.
It works completely different from traditional loans. Under this financial offer, lenders will open a savings account for you in which you will make monthly payments. The money deposited in this account until the repayment term and lenders will inform the same about this offering to the credit bureau to improve your credit ratings slowly and gradually.
In a simple way, Canada credit building loans provide you an opportunity to improve your credit scores by getting a loan and once the pending loan amount is settled and then find remaining amount for your personal use.
Key Features of Credit Building Loan Canada
There are some important features of credit building loan that you can refer to before applying for the same.
- The amount of loan falls anywhere in between $500 to $5000 depending on your financial condition.
- This is a short term loan in Canada usually offered for a couple of months that is less than 2 years.
- The interest rate of this loan in Canada falls anywhere in between 10% and 30%.
- You will get the funds for the personal loan only when the loan is paid off.
- It is an unsecured category of loan with having no collateral requirement.
Have a Look at Credit Score Criteria in Canada
Now, you might have got an idea about Canada credit building loan as to why it is offered, who can take the maximum benefit, and how much loan amount is offered.
Next is to understand the criteria of Credit Scores in Canada. Here, the average credit score is between 300 and 900. It has witnessed that anyone falling below 650 of credit scores have low credit ratings. While, if you have more than 750 credit scores, then you are eligible for all types of loan offers.
In Canada, credit report contains the information about your spending and due paying habits. Any of your previous loan or credit card bill paid or pending comes under this report to showcase your ability to tackle all the payments or not.
People who are unwilling to make scheduled loan or credit card bill payments on time have low or no credit scores. And, for such individuals, credit building loan in Canada is an ideal financial offer to enhance the credit scores in a matter of short time.
What you Need to Do to Get Canada Credit Building Loans?
If you are thinking about the exact same prerequisites of credit building loan like that of a personal loan in Canada, then you are mistaken here. As already mentioned, this loan is not meant to utilize the cash for personal usage but to make payment of the previous dues. Thus, you only have to showcase your regular and stable set of income to become eligible for this monetary offer.
Things to Consider Before Applying for Credit Building Loan
It’s not just like that you apply for this loan offering and start making monthly payments. It is better to know everything about credit building loan including of the below-mentioned points.
- You need to pay rate of interest.
- You need to have enough money to settle the loan and its information reaches the credit bureau that will improve your scoring.
- You cannot access the loan amount because it is meant to pay off the well on time.
Useful Tips to Manage your Credit Building Loans in Canada
A majority of lenders will provide you detailed information about a particular loan offering and suggest you numerous ways to utilize the funds. But only few provide you information regarding the seamless management of loan on a monthly basis.
Here, we provide you some tips to manage credit building loan.
- Make a small budget to decide how much you can spend on loan every single month.
- Borrow a small loan amount to make your loan easy to manage along with paying the interest charges.
- Opt for monthly payment loan that gives you ample time to settle the loan amount and gradually improve your credit ratings.
- Look for low interest rate monthly instalment credit building loan.
- Set up an automatic withdrawal feature on the bank account and not to forget monthly loan payment.
- Keep an eye on your credit ratings by asking for the copy of credit scores from the Credit Bureau and see if your credit ratings are genuinely improving or not.
Do Not Apply for Credit Building Loan if you Have a Good Credit Profile
Not everyone should apply for good credit building loans in Canada. Only those facing bad or low credit scores in the profile are meant best to apply for the same.
Sometimes, good credit holders consider this option to arrange extra cash. But there is no need to apply for this. It is because you already have substantial credit scores and there is no need to improve the same. Most importantly, loan amount under this fiscal aid is locked to make the payments but not for personal usage.