More Canadians Resorting to Alternative Lenders
Loans on a leash
Over the past few years the federal government has introduced a number of measures to tighten the Canadian mortgage lending market in an effort to preempt any U.S.-style real estate collapse. These changes have included capping the amortization period on CMHC-insured mortgages at 25 years and requiring the self-employed to provide third-party income verification with their application.
The result of these changes has forced some people to seek out alternative lenders. As someone falling into this category what are the options when the bank (or your parents) can’t help?
Depending on your personal requirements, there are a number of different options for Canadians looking for alternative lending – ranging from smaller amounts (Pay Day Loans), to medium sized amounts (online consumer loans) to larger amounts (alternative home equity lenders).
As an example of a pay day loan company, Wonga serves customers in Ontario, Alberta, and British Columbia. Wonga offers loans up to $400 ($1,500 for existing customers) for one to 45 days. But, much like Money Mart and other payday lenders, the rates are pretty steep. According to its web site, the borrowing cost for a $300 loan over 14 days can exceed 250%.
In the middle of the pack there are online consumer loan companies offering credit typically up to $10,000 and up to $35,000 on rare occasions. A Company such as Mogo* falls into this category and its online marketing materials offering rates much more attractive than Pay Day lenders; however, as would be expected, this option can still be quite expensive (interest rates up to 35.9%).
Lastly, there are the alternative lenders who lend to homeowners only. A home equity lending company such as Alpine Credits falls into this category and offers first, second and even third mortgages. The advantage with this option is that the cost to borrow will (in most cases) be less than a Pay Day loan or online consumer loans company. However, even though this option can be much cheaper than the other two alternatives, this market still represents a very small portion of the Canadian market (4 to 5%), as highlighted in a recent CBC article.
**Not sure what a Home Equity Loan is? Wikipedia offers an easy to follow explanation.
How We Help
Alpine Credits can help you get approved quickly for a home equity loan. If you own your home, you can apply in two simple ways: complete our online application or speak to one of our lending specialists at 1-800-587-2161. Our lending specialists will work with you to understand your situation and recommend the best loan structure for your needs.