With the way things are in the country right now, many people who think that they can get an unsecured loan from a bank aren’t really thinking at all. It’s more accurate to say that they’re dreaming an impossible dream. In today’s lending environment, getting unsecured bank loans in Canada is virtually impossible.
What is an Unsecured Bank Loan?
Most loans today—especially from Canadian banks—are secured loans. That means there’s some form of collateral involved. For example, when you get a mortgage or a home-equity loan you use your house as collateral. This means that if for some reason you are unable to pay the loan then the lender is legally allowed to take possession of the collateral (your home) to help pay back what you owe. It’s the same principle that applies to car loans and pawnshops.
With an unsecured loan, there’s simply no collateral at all. All you can offer is your word that you will pay back the loan on time. And that’s why getting unsecured bank loans in Canada is next to impossible; banks will not take that sort of risk. While it is theoretically possible to apply for an unsecured bank loan by proving that you have a stable income, that you have a superb credit history, and that you carry very little debt, in reality these aren’t enough.
The Remote Possibility of Getting an Unsecured Loan
Perhaps the one possible way to get an unsecured loan from a Canadian bank is to have a long history with that bank during which they made a lot of money with that relationship. For example, you have a long history with a particular bank of borrowing money from them and then paying the loan on time. Not only must you be able to prove that you have a steady income, but must have a spectacular credit rating as well. Today, even that scenario isn’t a sure thing, unless the bank also recognizes that you will also be borrowing money from them a lot more in the future.
Alternate Sources of Unsecured Loans
In the likely possibility that you are denied from getting an unsecured loan from a bank, there are still other sources to get the money you need without a need for any collateral. You can use your business credit card or even your own credit card to get a cash advance. Credit cards are probably the most commonly used type of unsecured loans. Another method is to take advantage of invoice factoring. If you have accounts receivable, a factor can give you as much as 90% of the value of the invoice upfront. Once your client pays the invoice in full, you get the rest of the amount minus the factor’s fees. Finally, you can ask money from your friends and family. With this option, you may be able to get a loan without any interest at all!