Unsecured Loan

A clear distinction should be drawn between a secured and unsecured loan. To apply for the first type of loan, you will need collateral, which will guarantee that you will pay off the loan amount. Collaterals can come in different forms, i.e. some property, car, or another valuable. No collateral is required if the borrower applies for an unsecured loan. However, because the loan is riskier for the creditor, higher interest rates will apply.

With this distinction in mind, it should be noted that virtually all unsecured loans fall in the group of consumer loans, while mortgages are almost always secured with some form of collateral. Thus, all short term loans in Canada – cash advances, payday loans, etc - are ‘signature loans’ in their essence, as only the applicant’s signature is required by the lender.

Interestingly, unsecured credit cards can also be regarded as unsecured loans. And while all of the big five Canadian banks (Royal Bank of Canada, TD Bank, Scotiabank, BMO and Canadian Imperial Bank of Commerce) tend to issue unsecured credit cards to their customers, an impeccable credit score is almost always required.
The Bank of Montreal, for example, offers a variety of credit cards such as cash back, air miles, no fee credit cards, and more. The BMO Preferred Rate MasterCard goes with no annual fee, interest rate of 17.5 percent, and low interest rate of just 11.9 percent for a fee of $20 a year. CIBC features a variety of MasterCard and Visa cards of the client’s choice. Among its everyday cards, one can check the CIBC Classic Visa card, going with an interest rate of 19.99 percent on purchases, no annual fee, and a maximum of 3 free credit cards.

With regard to lines of credit, they represent an arrangement between clients and their banks or other financial institutions, establishing a maximum loan balance to be maintained by the borrower. He or she can draw on the credit line as long as the maximum amount specified in the agreement is not exceeded. With TD Canada Trust, for example, customers can transfer their balances with a BOAT from a high interest credit card to a credit line. Clients can opt for fixed rate and lock a portion or all of their credit balance, paying it at a fixed interest rate. They can choose the amount they would like to go toward the outstanding balance, and it can be as little as $50 or 3 percent.

Unsecured car loans are some of the sought and popular unsecured loans in Canada. Undeniably, being able to buy a brand new car without any down payment or co-signers is a great comfort which, however, only those with long and perfect credit records can afford. The Internet is truly swarming with offers of unsecured car loans for borrowers with a bad credit score, but be aware that the interest rates on such loans may be quite high. In most cases, you can sign an unsecured loan agreement with an auto dealer or manufacturer based in Canada, or you can apply for an unsecured auto loan with your bank or credit union.

Needless to say, unsecured consumer loans could be used to finance emergency medical treatment that costs more than the patient’s health insurance coverage, a vacation abroad, or some other short-term expense. In any case, Canadian credit unions are said to offer the best unsecured loan rates in the country, so you’d better check out their offers first. Some of the largest credit unions operating in Canada are Vancity, Coast Capital Savings, Servus Credit Union and the Meridian Credit Union.