Unsecured loans are in demand in Canada because they can be used to get cash quickly. This is good news if you have an emergency and need fast cash ASAP. Unlike traditional lenders such as banks, lenders who offer unsecured loans offer more flexible terms and conditions.
If you're thinking of availing this type of loan, perhaps you have questions on your mind. To help you with an in-depth look at unsecured loans, read this article further to prepare yourself.
What Makes An Unsecured Loan Different From Other Loans?
As its name indicates, unsecured loans are precisely that – a loan that doesn't require security. What this means to laypeople is that you don't have to put up collateral to be able to borrow. Compared to secured loans, this puts less burden on the borrower. So, if, for example, your car suddenly develops engine trouble and you have zero savings in the bank, you could immediately avail of an unsecured loan to pay for car repair.
An unsecured loan falls under the category of personal loans, just like secured loans. The main difference is that you will have to provide a valuable asset, like your house or car, as collateral for a secured loan.
Who Offers Unsecured Loans?
Because this kind of lending is becoming so popular, you can find many lenders in Canada who now offer unsecured loans. Generally, these lenders operate via websites so that Canadians can apply for their unsecured loans online. Some lenders may limit the scope of their lending, meaning you have to be a resident of a particular province in Canada to avail of a loan.
How Much Can You Borrow?
The amount you can borrow will differ from lender to lender. Many lenders start lending at CAD$500, and then the range goes up. Some lenders may lend up to CAD$30,000, depending on the circumstances of the borrower and the details on the loan application.
Is There A Fee If You Apply For An Unsecured Loan?
Yes, all online lenders will charge you a certain fee if you take out an unsecured loan. The rates vary from lender to lender, though. The interest charged may range from a low of 13% to a high of 40%, depending on how much you are borrowing. Since there's no collateral to be offered as security, the application process tends to be fast and easy as well.
Why Do Canadians Get Unsecured Loans?
People have different reasons for applying for an unsecured loan. But for many, they borrow because they have an emergency that requires quick payment. Since these people don't have enough savings on hand to deal with the crisis, they try to apply for unsecured loans. Usually, the amount these borrowers need is relatively small, which they can easily pay for with their current income.
Will The Lender Ask You Why You're Getting An Unsecured Loan?
It's possible, but most likely, the lender will simply ask how you intend to repay. Since it's so easy to apply for an unsecured loan, you can get one for any reason. For example, you can apply for a CAD$500 loan to pay for emergency repairs of your car, credit card debt, or college tuition. A small loan can be used in a flexible manner. It's really up to you how much of your loan will go toward a certain expense.
Does Everyone Immediately Qualify For An Unsecured Loan In Canada?
The reason a would-be borrower is required to apply for an unsecured loan is that the lender has to consider whether the borrower is a good risk. The risk the lender assumes when lending goes up because they don't ask for collateral. So, there's always the risk that the borrower will default on the loan.
On the other hand, quick loans like this are much in demand, so these represent a good business opportunity for the lender. To compensate for the lack of collateral, the interest rate of the loan is high. This is good for the lender since they're putting themselves at risk by lending. It's also good for the borrower that the lender doesn't require collateral because the latter won't have to spend much time assessing the value of the collateral. The application process goes much faster this way.
Many unsecured loan companies that operate online can process a borrower's application even during graveyard hours from midnight onwards until morning. This means some lenders operate round the clock, which is convenient for borrowers. Otherwise, you'll have to wait until traditional lenders like banks open for business in the daytime. So, the high interest rate will cover the expenses of the lender's 24/7 operations.
How Do You Qualify For An Unsecured Loan?
You will need to submit documentation to prove that you satisfy the following requirements:
- Be Of Legal Age - Anyone can apply for an unsecured loan provided you are of legal age. Most lenders offer their loans to working adults so that they don't have to work so hard to find borrowers. This is beneficial to the lender because the 'net' they cast will bring more business for them from employed borrowers.
- Have A Positive Credit Score - Not everyone will be allowed to borrow, especially if you have issues such as poor credit history. Although some people may still be allowed to borrow despite their low credit score, it's generally better if you have a high-ranking credit score to present to the lender. It's proof that you have a pattern of repaying credit on time. It also means the interest rate for your loan will be lower if your credit score is at a comfortable level.
- Earning Sufficient Income - The third most important qualification is that you are employed at the time you apply for the loan. The lender will also be interested if you're earning sufficiently so that you can afford to repay it. Some people might be employed yet lack sufficient income, so their application will be rejected.
- Have A Co-signer For The Loan – Some lenders add this extra step to the lending application process. Lenders will ask for a co-signer in case your credit history is flawed in some way or if you have a low credit score. This way, if you default on your loan payment, the lender can require the co-signer to pay on your behalf. The co-signer usually has to have a better credit history or higher credit score than you to be allowed as the co-signer.
How Many Kinds Of Unsecured Loans Are There?
There are generally three major types of unsecured loans. These are:
- Term Loan – This is the kind of small loan familiar to many people. The lender offers the loan as a lump sum amount. The borrower then repays the loan in installments, which are smaller and more manageable amounts. There is also interest added to the loan amount to be repaid.
- Revolving Loan - People are very familiar with this kind of loan nowadays because credit cards are the most popular and most common type of revolving loan. In this kind of lending agreement, the borrower can ask for a certain amount which they are expected to repay. Once the original loan has been repaid, the borrower can apply for that same loan amount again.
- Consolidation Loan - This kind of loan is sometimes called the 'debt consolidation' loan because it's used by people who have large debts. Often, these large debts are multiple credit card debts that each need to be repaid. So, the borrower gathers together all these individual debts and uses a consolidation loan to make just one payment for the accumulated debt amount. That means all the individual credit card debts are now paid, then the borrower can proceed to pay for the consolidation loan itself in installments. The advantage of this kind of arrangement is that the borrower no longer has to pay the higher interest rates of the individual debts. Instead, they just have to contend with one lower interest rate for the consolidation loan.
Are Unsecured Loans Better Than Secured Loans?
It depends a lot on whose perspective you view the lending relationship. For a lender, a secured loan may be better because they can ask for sizable collateral that has about the same value as the loan amount. So, if you default on your secured loan, the lender can seize the collateral you put up as security for the loan. They can then sell the asset and recoup what they lost when you defaulted on your loan. This is why borrowers tend to apply for larger amounts through secured loans because they know that these assets have value that convinces lenders to approve their applications.
However, the lender may be able to get more borrowers if they offer unsecured loans instead. The amount they will lend may be smaller than those offered through secured loans because the borrower will probably be able to repay small amounts. Since the amount being borrowed is small, the lender doesn't feel the need to get collateral. However, the lender will require an interest rate for the unsecured loan that's higher than those for secured loans. This way, they compensate themselves for the risk they take when offering unsecured loans.
If You Default On Your Loan, Will The Lender Take Your Personal Assets?
This condition depends on your circumstances, particularly if you're declaring bankruptcy. The idea behind applying for an unsecured loan is to avoid putting your personal assets, such as your home or car, up for collateral. However, you did agree to repay your unsecured loan. Thus, no matter what reason you may have for the loan payment default, you are still liable for that obligation. The lender always has the option of filing a lawsuit against you in an attempt to recoup their loss. It will then be up to the discretion of the court whether they will seize your personal assets as compensation for the lender.
You have to understand that lenders charge high interest rates because it's very hard to collect on loan payments. So, it's your responsibility to make sure you have the right 'capacity to pay.' If you want to get an unsecured loan, the first thing you need to do is compute for the manner of payment and factor that into your expenses. That way, you'll easily pay off any debt using your regular income.
If You Find It Difficult To Repay Your Loan, Can You Request For A Longer Payment Period?
The responsible thing to do if you're having a hard time repaying your unsecured loan is to write to your lender right away. Explain to them what the difficulty is so that they can consider extending the payment period for you. The lender might impose a higher interest rate on any unpaid amount since they're taking on even more risk by extending your payment period. But the lender may be considerate regarding your case if you're honest about your loan payment problem.
Will The Lender Accept Advance Payments For Your Loan?
It's usually a good idea to pay for your loan well before the actual due date. The lender may even lower your interest rate if they see that you're a responsible payor. To keep things organized, though, you may write to your lender to explain that you're ready to pay off your debt before the due date you agreed on. That way, the lender could organize their records to factor in these advance payments.
In Canada, you can find lenders who offer unsecured loans, and they are legitimate personal loan providers. They offer a good service for people who may have limited capacity to pay. Before you attempt to apply for an unsecured loan, though, check your income level first and assess your standing while keeping your expenses in mind. You should also look at many lending websites to see the kind of interest rates they charge for your preferred loan amount. That way, you won't have any nasty surprises when it's time to repay the loan.
When we envision a person who is suffering from substance use disorder (SUD)—defined by having a history of past misuse, experiencing increasing mental health symptoms, or having a family history of addiction—we often picture someone waking up and instantly grabbing their first drink. However, in my experience working with those battling SUD for nearly a decade, I've learned that everyone's relationship with alcohol looks different and having a few too many drinks at night can be just as dangerous.
The time of day, amount, or type of alcohol one drinks doesn't define if they suffer from SUD or not—it's the compulsion to drink. By focusing on healthy stress relievers and implementing them into your daily routine, you aren't just avoiding another glass at night, you are curbing any inclination for SUD that you may have.
While you may feel the desire to reach for another drink after dinner and putting the kids to bed to relieve some of the stress you incurred that day, there are other things that you can do that are much more beneficial to your mental health and wellbeing.
Risks of Reaching for Another Drink
Reaching for another cocktail or glass of wine can feel like a great way to relieve the stress of the day at the time, but over time it can actually lead to the opposite. Excessive drinking is known to lead to increased anxiety, depression, and other mental health disorders such as increased risk of family problems, altered judgment, and worsened sleep quality. These can all lead to increased stress and create a continuous cycle I have seen in many of my patients, which often prove difficult to break.
Increased alcohol consumption can directly impact an individual's mood and temperament, too. In my patients, I've seen a connection between increased alcohol consumption and irritability, fatigue, and loss of interest in activities that previously brought that person joy—activities that people should always put time into, especially right now during the pandemic.
While drinking in moderation doesn't have serious implications for some, others are already at increased risk for SUD. One drink per day is considered moderate for women, while eight drinks or more in a single week is categorized as heavy drinking. It's important to monitor your intake—whether you are at increased risk for SUD or not. It is all too easy for one glass to become another, and then another. And if you keep reaching for just one more drink, you can start to build a tolerance, as it requires more and more alcohol to achieve the desired effect. This can result in dangerous, addictive habits that will alter your life, and the lives of those who care for you.
Three Healthy Ways to Relieve Evening Stress
Stress relief from alcohol is short-lived, but choosing healthier, alternative stress relievers can provide long-lasting benefits for both your mental and physical wellbeing. At Wellbridge, our team not only focuses on treating addiction but also on teaching healthy habits to support ongoing sobriety. And many of these learnings can be implemented to avoid addiction by handling stress better as well!
Below are three healthy stress relief ideas you can implement into your routine:
- Mindfulness exercises can be a powerful and mentally stimulating stress reliever. Throughout our therapeutic program at Wellbridge, we provide different opportunities to cultivate mindfulness. For example, breathing exercises, such as box breathing or diaphragmatic breathing, mindful walking, and progressive muscle relaxation. If you're looking for entry, guided meditation, check out this YouTube channel where experts post mindfulness exercises each week.
- Human connection is invaluable. Whether it is your spouse, your children, a friend, or even a therapist, connecting with someone else can be a great way to relieve stress. The additional perspective that another person provides can also help us feel that the anxieties and stressors we are experiencing are more manageable. If you are feeling increased stress from loneliness or isolation, reach out and schedule a Zoom coffee hour with a friend, or call a loved one to check-in and chat.
- Physical activity is an excellent stress reliever as well, for so many reasons. Not only can it help us get our mind off of stress, it enables our bodies to release endorphins and provides long-lasting physical health benefits. Physical activity doesn't need to be a full-blown workout if you don't feel up to it, or simply don't have extended periods of time to dedicate to a longer exercise regimen. Even a short walk or some stretching can go a long way towards improving your mood. I enjoy following guided, online yoga practices for both mindfulness practice and physical activity.
Despite my years working in this space, I am no stranger to giving in to stress. However, I've learned that by allotting myself a little time each morning and evening for activities that set a positive tone in my life—like meditation, journaling, and exercise—I've been able to better manage my stress and feel more prepared for heightened periods of stress. Do I manage to set aside personal time every morning and evening? Definitely not—life happens! But by doing our best to take regular time out for ourselves, we're all certain to be in a better place emotionally and mentally.
Putting Your Mental Health & Wellbeing First
It's important to also recognize that it isn't just stress that causes us to reach for another drink at night. With the added pressures and responsibilities of women in today's world, having another glass of our favorite drink at the end of the day can often seem like a quicker and easier option than other healthier ways to relieve stress.
However, it's essential to put your mental health and wellbeing front and center in your priority list—something that many women struggle with. But just like the oxygen masks on an airplane, you can't take care of others if you don't take care of yourself first. By focusing on implementing small, healthy habits and making them a seamless part of your daily routine, you ensure that you can show up in all aspects of your life and for all the people in your life.
If you are struggling with increased stress, be specific and honest with your support system about your need to preserve your mental wellbeing. Prioritizing your needs will help you be there for other people you care about in your life.
I always refer back to a quote from a Dar Williams song—a song about therapy no less! "Oh, how I loved everybody else when I finally got to talk so much about myself." Talk about your needs with others and find time to develop healthy coping habits. And if you feel as though you've already created an unhealthy relationship with alcohol, discuss that relationship with a medical advisor to learn if advanced treatment is the right option for you.