Application Mistakes Part 4: Loan Types

Loan types

There are many reasons to need a loan. Maybe you’re in need of home or car repairs. Maybe you’ve fallen behind on bills and expenses. Or maybe you finally got time off and need to get away on a vacation.

Whatever your reason, be sure to choose the right option when completing your application. Loan types can often be a determining factor in which lender options are available to you. Not every lender provides loans for all purposes. Some are more selective, only funding certain loan types, while others will fund you for any reason.

Most Common Loan Types

Debt Consolidation

Debt consolidation loans are recommended when you have 2 or more different types of credit you’d like to combine into a single payment. For example, if you are paying a high-interest loan, and a credit card balance, debt consolidation can help. Use this loan to pay off both remaining balances and then pay back your loan, hopefully at a lower rate. These are usually used for large amounts of debt. If you’re looking to consolidate $300 worth of debt, there is a probably a better choice for you!

Pay Off Credit Cards

This loan type is fairly self-explanatory. If you have one or more credit cards you want to pay off, this is the loan type for you. The idea here is to hopefully get a lower interest rate than what you’re paying on your credit cards, or turn multiple monthly payments into one! It varies from a debt consolidation loan as this is credit card specific, not multiple forms of debt.

Home Improvement

This one is also fairly self-explanatory. However, it is reserved for mortgage-holders/homeowners looking to improve their investment. If you are a renter looking to spruce up your place, you’re better suited to loan types such as “purchase an item” or “bills and expenses”.

Purchase an Item

If you’re looking to make a purchase such as a new computer, furniture (for your home/apartment), or a trailer for your truck. However, if you’re looking to purchase a whole vehicle, there is a better option below.

Grow Your Business

These loans are perfect if you own or run a small business. You can use the funds to take your company to the next level, or invest in new equipment. However, the private lenders in LoanConnect’s network provide personal loans, not business loans. So if you are looking to raise capital to start a business, these loans may not be enough. Feel free to contact team@loanconnect.ca to discuss other possible options.

Cover Medical Expenses

Unfortunately medical bills can really stack up. If you’re looking to get some important dental work done, or if your pet needs expensive veterinarian care, this is the right type of loan.

Pay For a Wedding

Congratulations! If you need help paying for your special day, there are loan options to help.

Buy a Car

As mentioned above, “purchase an item” works for a lot of things, but not vehicles. Some lenders specialize in new/used vehicle financing and can get you competitive rates. But regardless, you will pay much more interest if you take out a “purchase an item” loan to buy a car than an actual car loan.

Take a Vacation

Sometimes you just need to get away and unwind, there are loans to help you do just that!

Bills and Expenses

This is the most common loan type request. It covers those times when you need to pay for your child’s extracurriculars, car repairs, or even extra cash for a special occasion. Loans for bills and expenses cover those day-to-day needs and emergencies we can’t always be prepared for.

Rebuild Your Credit

Sometimes a loan is a great way to rebuild your credit. As long as you are in a position to make all payments in full, and on time, a loan can actually improve your credit score. But there are other approaches that can be more cost effective and time efficient. Start by considering this type of loan and see below!

Other

This is the choice to use when nothing else seems to fit! Maybe you’re in a need of a loan for multiple purposes – pay off a credit card and get new snow tires. Having multiple financial needs that don’t fall under the same umbrella is when it’s best to use “other”.

Final Thoughts

If at any time during the application process you are uncertain about what choice to make, what information to fill in, or how the process works, simply contact us here at team@loanconnect.ca and we will be happy to help as best we can.

No one is perfect, we all make mistakes; so if something doesn’t seem right when completing your application, don’t be afraid to ask. We can help you take a step back, review the issue and together do our best to solve it. It is always best to send an application that is as accurate as possible. Every time a lender checks your Credit Report, your credit score will take a hit. So let’s prevent as many mistakes as we can together so that you get the best chance at success, the first time!

Other Application Mistakes

While income source is a big mistakes I see, it’s not the only one. Continue reading how other areas of your application could also be restricting your approvals, and/or rates.

  • Housing Choices – Read part 1 of my series now and why your housing choice could make or break your application
  • Income – Read part 2 of my series now and why your income source is important
  • Preventing errors – Read part 3 of my series and understand how taking your time could actually save you time
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