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What kind of credit is right for you?

Your credit options depend on how much you need and for how long

Some larger purchases, like buying a home or car, paying for a wedding or unexpected emergencies, are out of reach for most people, without the help of some kind of loan. Your needs and personal situation will drive the best option for you to ensure you pay as little interest as possible. Before you consider borrowing funds to make a larger purchase, get to know the options available to you and the different  benefits and costs of taking out a loan, line of credit or credit card.

 

Personal loans 

With a personal loan, you receive the necessary lump sum, all at once. It has a fixed repayment term and regular, monthly payments. This loan must be paid off in full at the end of the term. 

 

Good for:

One-off purchases like a car or appliance.

Renovations, weddings or consolidating expensive debt like credit cards. Not only will you reduce your monthly credit card payments you’ll also pay off the whole amount at the term end.

Maximizing your RRSP contributions with RRSP loans.

 

The Pros:

You pay a set amount, every month, until it is paid off. 
They can be unsecured, so you don’t have to have equity in your home or other security to get one. 
Applying is fast and easy. 
They usually offer considerably better interest rates than credit cards.

 

The Cons:
Interest rates are usually higher than Home Equity Lines of Credit (HELOCs). 
There’s often no flexibility on repayment terms and may be charged a penalty if you pay it off early. 
Normally for much smaller amounts than you might get with lines of credit. 

 

Chinook Financial offers personal loans with competitive rates and very flexible repayment terms - you can pay off all or some of the loan at any time, with no penalties. 

 

Lines of credit 

These offer a much cheaper way to access revolving credit than credit cards. You can draw funds up to your credit limit, at any time. You only pay interest on what you borrow at any point in time. If you owe nothing, you pay nothing.

 

Both personal, unsecured lines of credit (usually for smaller amounts and often at higher interest rates) and Home Equity Lines of Credit (where the money is secured against the equity you have in your home), are available.

 

Good for:

Varying borrowing needs.

Unexpected/emergency expenses.

Renovations. 

Credit consolidation - you’ll pay far less in interest and you get to decide when you pay off the loan. 

 

The Pros:

Far more flexible than regular loans. You can pay off the minimum amount (usually the month’s interest), or a larger sum, all with no penalty. 
Pay interest only on what you owe. 
Use the money to buy or pay for anything. 

 

The Cons:

For a HELOC, you need to be a homeowner and have a good amount of equity in your home.
Interest is at a variable rate, so monthly payments can increase. 
It is a much longer application process.
HELOCs are secured against your home so you will probably have to pay for an appraisal and closing costs. 
If you default, you can lose your home. 

 

Chinook Financial offers personal lines of credit and HELOCs at competitive rates. You can access funds conveniently through your chequing account payment card. With a Chinook Financial HELOC, you can get up to 80% of your home’s value, minus current mortgages and liens.

 

Mortgage Refinance 

If you have various sources of debt and wish to consolidate into one monthly payment, a mortgage refinance can be a good option. 

Most lenders will allow you to borrow up to 80% of the value of your home, including what you already owe.   
 

Good for:  

Paying off high balances of high interest credit cards. 

Paying off personal loans, lines of credit and car loans where the interest rate is higher than your mortgage rate.

 

The Pros:

Consolidate many bills into just one loan and one monthly payment. 
Save a lot of money in interest (mortgage interest rates are a fraction of most credit card rates). 
Reduce your monthly outgoings significantly. 
Pay off the principal of what you owe. 

 

The Cons:

It will cost money to refinance. You will probably need to get a lawyer involved and have an appraisal. 
Your mortgage payments will go up and you may have to take longer to pay it off. 
Interest rates on refinance mortgages can be a little higher than the rates for a straightforward renewal.

 

Credit Cards

A credit card can be a good option when you need a revolving amount of credit available to you for unexpected purchases or when money is tight. If you don’t qualify for a line of credit then a credit card may be a good alternative.

 

Good For:

Unexpected expenses like car or appliance repairs. 

Access to funds when money is tight.

Getting through an expensive time like the holiday season.

Making online purchases.

 

The Pros:

They’re fairly quick and easy to apply for. 
You can save as you spend. Many credit cards offer points that you can cash in for rewards. They also provide other money-saving perks like travel benefits and extended warranties. 
You can pay off the amount you borrow at your own leisure, so long as you make the minimum payment every month.  

 

The Cons: 

Interest rates are typically 19.99% and upwards.
If you carry a large balance, the monthly minimum payments can become difficult to manage. 
If you miss payments, this will have a serious impact on your credit score. 

 

There are a lot of card options out there. Be sure to do comparison research on cards before selecting one, including considering what kind of rewards program or low interest cards make best sense for you!

 

If you’d like to discuss which loan or credit option is right for your current circumstances, contact Chinook Financial today. We’ll help arrange the most cost-efficient way for you to get your hands on the money you need, right now. 
 

The Legal Stuff:

*Terms and conditions apply. Authorized credit approvals required for all overdraft, credit card and lending products. All rates and products are subject to change without notice. The advice on our website is prepared without knowing your personal objectives, financial situation or needs. Before you act on this or any advice, please consider if it's right for you, and reach out to our teams to help determine if the product is appropriate for you. All trademarks are the property of their respective owners. Legal Terms of Use apply.