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Whether it’s to start a home renovation, consolidate your debt, or pay for unexpected expenses, borrowing money can be a useful tool to reach your goals. While borrowing does come with costs, knowing what to expect can go a long way towards improving your overall financial well-being.
To help you navigate this, we've created a comprehensive guide that covers what you need to know about borrowing money to meet your financial goals — along with practical tips to help you make decisions about your money.
Before we explore the different types of loans available, let’s go over some fundamental aspects of borrowing. The ‘cost of borrowing’ refers to the original amount that you borrowed, plus interest and any applicable fees you’re required to pay.
Now, let’s take a closer look at some key terms for a deeper understanding of the cost of borrowing.
Secured loans are backed by collateral so they pose a reduced risk to lenders, while unsecured loans aren't. Secured loans usually have lower interest rates, but failing to pay can put that collateral at risk. Unsecured loans generally come with higher interest rates to reflect the higher risk.
Your credit score is a reflection of your borrowing behaviours distilled into a triple digit number. This number tells lenders how trustworthy of a borrower you are, and can impact the rates you qualify for on your mortgage, personal loans, and more. Typically, the higher your credit score, the lower the borrowing costs. Actions such as paying bills on time, only borrowing what you need, and infrequently applying for credit can help you maintain a stronger credit score.
Regularly checking your credit scores will help you catch errors quicker and stay eligible for better rates. You can request a copy from one of the two major credit bureaus in Canada: Equifax and TransUnion.
Your credit score is a three-digit number, ranging from 300 to 900, that lenders use to evaluate your eligibility for loans and determine what interest rate they’ll offer.
Learn more about the best ways to improve your credit score.
Your credit score is a three-digit number, ranging from 300 to 900, that lenders use to evaluate your eligibility for loans and determine what interest rate they’ll offer. Learn more about the best ways to improve your credit score.
As mentioned earlier, establishing yourself as a responsible borrower comes with several perks. Here are just a few key ones:
There isn’t one single way to borrow money. Knowing the different types of loans available can help you choose the option that best fits your unique financial goals and needs.
When it comes to borrowing, your credit score matters. Ignoring it could mean higher interest rates or even rejected applications but nurturing it could mean better terms and interest rates.
Everything is easier with a little help.
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