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How to get a loan

April 14, 2023
min read

A loan can help you buy a car, manage high-interest debt, or fund a home renovation. We’re covering everything you need to know before applying.

Woman looking at laptop and credit card

If you’ve never taken out a loan before, the process can be daunting.

Before you apply, what do you need to do?

Here’s how to get a loan in 4 easy steps:

   1. Determine how much money you’ll need

   2. Check your credit score

   3. Research your options

   4. Gather everything you need to apply for a loan

The application process is easier than you think. We’re going through it one step at a time so that by the end, you’ll be ready to take out your first loan:

Determine how much money you’ll need

Before applying for a loan, one of the first questions to ask yourself is: How much do I need to borrow?

The answer depends on what you plan to do with your loan.

If you want to buy a car or pay for home renovations, you can apply for the amount you need to cover those costs.

If you’re looking to consolidate your debt, the process is a little bit different.

Before you apply for a loan, go through your financials to determine how much debt you have - we’ve covered the first steps to tackling your debt here.

By consolidating your debt, you can save money on interest and simplify your life. A consolidation loan wraps your debt into a single monthly payment. Try Cambrian’s PayOff Debt Calculator to see how much you can save.

Check your credit score

Your credit score is one of the first things a lender will look at when reviewing your loan application.

Every 12 months, you’re entitled to one free credit report from each of the two credit bureaus in Canada: TransUnion and Equifax. All you need to do is request a copy on their websites.

Now you might be thinking: Does your credit score drop when you check it?

No. When you check your own score by getting a credit report, there’s no hit to your credit.

A high credit score means that you’ll receive a better interest rate on your loan. With a lower score, you may pay a higher interest rate.

To improve your credit score, you can:

  • Limit applications for credit until your score has improved. You may not want to apply for a new credit card around the same time as your loan. These types of credit checks do lower your score.
  • Have a variety of different credit products . For example, having 2 credit cards or a line of credit can help lower your credit utilization ratio. This measures the percentage of your available credit that you use. Aim to use no more than 30% of your available credit to avoid impacting your credit score.
  • Make all your payments on time. Remember: Only take on credit that you can afford to pay off on time - late payments will harm your credit score and will end up costing you more every month.

Knowing your credit score isn’t just a good idea when applying for a loan – it’s a good habit to get into to ensure everything is on track!

If someone tries to steal your identity, you may spot the first signs of it on your credit report. Your report will reveal if someone has taken out a loan in your name.

When you receive your credit report, it’s important to check for errors, such as lines of credit you never applied for or paid-off debts that were incorrectly sent to collections.

What should you do if you spot a mistake on your credit report?

Visit the Equifax and TransUnion websites to complete a dispute form, and they will investigate. Be prepared to provide evidence to support your claim, such as receipts or account statements.

Research your loan options

Not every loan is the same, and the loan that’s right for someone else may not suit your needs. Take the time to research which type of loan is a good fit for you.

For instance, are you able to pay off your loan at any time, or are you locked into a fixed term? Paying off your loan early can save you money on interest.

In addition, make sure to shop around for the best interest rates offered by different financial institutions.

If you have ongoing credit needs, such as home renovations or your child’s education, a line of credit allows you to create your own loan whenever you need it.

On the other hand, if you have credit card debt spread around a variety of credit cards, a Cambrian PayOff Loan will help you consolidate your debt to save on interest.  

Did you know that credit unions tend to offer better interest rates on loans than banks? That’s because credit unions are financial cooperatives, and they share their profits with members through better rates.

What you need to apply for a loan

Applying for a personal loan is quick and easy. At Cambrian, our online loan application takes just 15 minutes!

If you’d rather meet with an advisor in person to talk about your options, you can book a meeting online.

Before you apply for a loan, you’ll need to gather some information and documentation. Here’s what you’ll need:

- Employment information, including your gross monthly salary (before taxes and deductions)
- Information about your assets, such as any properties you own, vehicles, RRSPs, and chequing and savings account balances
- Information about your debt payments and liabilities, which include mortgages, loans, credit cards, and rent payments
- Valid photo identification
- Income verification (pay stub, T4, etc.)
- Statements (bank, credit card, etc.)
- Tax return

What if you need a co-signer?

If you have a low credit score or you don’t have a long credit history, you may need someone to co-sign your loan.

A co-signer agrees to take on the debt and make payments if you are unable to. It’s important to make sure your co-signer is aware of this responsibility and willing to do so.

Your co-signer will need to provide the same information and documentation you will, as well as complete an application.

What is collateral?

In some cases, you will need to provide collateral to secure your loan. Collateral is an asset of value – generally a vehicle or your home, which provides security to the loan.

Providing collateral can lower your interest rate, and help you get approved for a loan if your credit score does not qualify you for an unsecured loan.

Apply for a loan with Cambrian today

A loan can change your life; it can help you get out of debt, buy a new vehicle, or give you the means to renovate your home.

At Cambrian, we’re here to help you get a loan. To get the process started, contact us today.

Today’s Rates

*All rates and yields subject to change without notice.
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