Fairstone, banks and payday lenders. What’s the difference?

Fairstone provides responsible lending solutions for Canadians who may not have the option of getting a loan from banks.

When Canadians need a loan, they usually turn to the bank first. Banks offer lower interest rates, but lend to individuals with high credit scores. If someone doesn’t qualify for a bank loan, they might turn to a payday lender. Payday lenders offer higher interest rates than the banks, but provide loans to individuals with lower credit scores.  However, did you know there are options in between? Fairstone offers lower interest rates than other non-bank lenders for individuals with fair to good credit scores.

Let’s review the difference between Fairstone, banks and payday lenders.

Banks: Lowest interest rates for individuals with excellent credit

Banks often offer borrowers revolving credit products, like a line of credit or a credit card. Occasionally they will offer installment loans, but only to specific customers.

Banks are able to offer the lowest interest rates on their credit products for a few reasons:

  • They only lend to individuals with high credit scores, which means there is less risk that borrowers will default
  • In addition to lending money, banks accept deposits. They use deposits as a source of money for their lending services, meaning banks don’t pay interest on the money they lend out.

Is a revolving credit product “better” than an installment loan?

Even though revolving products come with lower interest rates, if you’re regularly carrying a balance or getting behind on payments, interest charges can add up quickly and become unmanageable. Read more about how interest works on revolving credit products here.

What if I don’t qualify for a loan at the bank?

Even though banks offer the lowest interest rates compared to other types of lenders, they may not be an option for some borrowers. So where can these individuals go for a loan?

Fairstone: Lower interest rates than other non-bank lenders for individuals with fair to good credit

Fairstone offers lower interest rates than other non-bank lenders. We offer both secured and unsecured loan options, with rates starting at 21.99% for personal loans and 12.99% on mortgage refinancing. The interest rates on our loan products vary depending on the product you choose, your credit score, income and other factors.

We understand a lot of people come to Fairstone to find a solution for urgent or unexpected expenses, so we try to make the application process as quick as possible. However, we also understand it’s important to find a loan that’s right for you. That’s why Fairstone Lending Specialists will spend the time helping you create a personalized loan solution and with a payment schedule that suits your budget, needs and lifestyle.

Looking more information about Fairstone loans? We have several tools that can help you estimate your loan payments, see how much you might qualify for or calculate what your savings might be with a debt consolidation loan.

Ok, so banks have the lowest interest rates and Fairstone’s in the middle, what is at the other end of the spectrum?

Payday lenders: Higher interest rates for individuals with lower credit

Payday lenders offer the highest interest rates on credit products, but it’s easier to qualify with a payday lender than with a bank. Payday lenders are generally focused on getting customers approved, but may not spend as much time servicing your account – which makes sense since payday loans require a quick turnaround for repayment.

Another way payday lenders are different is the limit on the amount of money they lend to customers. Usually the maximum is only a few thousand dollars, which may not be beneficial for customers who need more flexibility in their budget.

When you take a step back to look at the financial services industry, you’ll realize it’s not as binary as you may have thought. Rather than banks at one end and “everyone else” at the other, the lending landscape is a spectrum, with different lenders serving borrowers with different credit scores and borrowing needs.