What borrowing options do I have other than a bank?
It can be a shock if the bank denies your borrowing request, and if yo’re already in a financial pinch you may be feeling anxious or even panicked. Whether you’re cash strapped and don’t know where to turn or you’re investigating your options because you know your credit score has worsened recently, know this: you have borrowing options that can keep you empowered as a borrower and in control of your finances. And, there are more alternatives to banks than payday lenders.
The lending landscape
Here’s a graphic offering one way to look at the Canadian lending landscape: a range of lending companies designed to serve customers with different borrowing needs and credit histories.
Banks have the most stringent borrowing criteria and typically only lend to individuals with excellent credit scores. They are also more selective about who they lend to based on income stability (how long you’ve worked at your job, how long you’ve received your current salary for, etc.). As a result, someone with unconventional or irregular income likely won’t qualify for credit at a bank.
Although the banks have the strictest borrowing criteria, it doesn’t mean the people they decline don’t need to borrow money – it simply means that the bank is not willing to lend it. Fortunately for borrowers, banks are only one type of lender serving the Canadian market.
Other than banks, Canadians can look to borrow money from companies like:
Credit unions are the most similar to banks compared to other lending options, but generally have slightly less stringent policies when it comes to offering credit. If you’re very close to being able to borrow from a bank, but not quite there, a credit union may be right for you. Like banks, credit unions offer “full-service banking” – everything from chequing accounts to credit cards, loans, investments and mortgages.
A “near-prime” lender – AKA Fairstone
Fairstone comes next on the lending spectrum. We’re not a bank – we don’t offer chequing accounts or investments – we focus solely on lending. We serve people in the fair- to good-credit score range, who aren’t eligible for a loan from a bank but want the same thorough, one-on-one service and reliable borrowing solutions. Many customers use Fairstone as a temporary solution when they don’t qualify at a bank. After successfully managing their loan and making on-time payments, several customers will qualify for a bank again in the future.
Fairstone offers larger loan sizes, lower interest rates and longer loan terms than other non-bank lenders, has a wide range of borrowing options, and has been serving Canadians in need of non-bank loans for almost 100 years. Read more about our personal loans, home equity loans and debt consolidation services here.
Mid- to lower-market lenders
There are other lending companies between Fairstone and payday lenders. As these companies serve customers with lower credit scores or more rocky borrowing histories, their loans generally have higher interest rates. Depending on the company, they may offer personal loans, home equity loans and mortgages.
Payday lenders offer the highest interest rates on credit products, but also the least stringent qualification criteria. Their interest rates and loan terms are structured differently because payday loans require quick repayment (sometimes as little as a week or two weeks). Payday loans are also smaller, since they are meant as more of a stop-gap measure when you’re short on cash. Usually the maximum loan size is only a few thousand dollars, which may not be as beneficial for customers who need more flexibility in their budget or a longer-term solution.
Beyond these borrowing options there are also unregistered private lenders, but we urge you to be cautious and do thorough research. And, be wary of any lender that requires you to send them a deposit before releasing their funds, since this can signal fraud and you may never get your money back. While anyone can lend money, registered lenders do so under regulations designed to keep Canadian borrowers safe. These regulations outline criteria for loan terms, transparency, and lack of deposits required to ensure lenders are providing reliable, safe loan options to Canadian borrowers with a wide range of credit histories.
Remember, whatever your financial situation is today, you always have options as a borrower. Familiarizing yourself with the Canadian lending industry will empower you to stay in control of your finances and ensure you continue to choose the right lender for you.
Learn more about the Canadian lending landscape through this video:
Interested in a loan? Try our free loan quote! In just a few minutes, we’ll tell you how much money you could qualify for and what your payments might be. No obligation and no impact to your credit score.