Loan Information & Tips

PenFinancial Personal Loans are very flexible to suit your needs. Payments can be weekly, bi-weekly, semi-monthly or monthly. The payments can be via direct transfer, personal cheque, payroll deduction or direct deposit - whatever suits you best. Life and Joint Life Insurance is low cost. Credit Disability Insurance and Term Life insurance is also available at reasonable group rates.

Borrowing money, if wisely used, can be an effective way to enhance your lifestyle. Loans are increasingly becoming a way of life for Canadians. They can provide convenient financing for many of your lifestyle needs.

Loans can be used for almost anything including:
Automobile Purchases
Vacations
Furniture
Home Improvements
Investments
Debt Consolidation
Education
And much more...

There are some important factors to consider when borrowing money:

The Term of the Loan
This refers to the amount of time over which the loan must be paid. Terms range from weeks to many years. Most personal loans are financed over 1 to 5 years. Usually, the longer the term is the lower the payment. For example, if you borrow $10,000 at an interest rate of 8.00% and select a 1-year term, your monthly payments would be $869.88. If you borrowed the same $10,000 but selected a term of 5 years; your monthly payment would be $202.76.

The Payment Frequency
This refers to how often you will make payments. Payments can be weekly, bi-weekly (every 2 weeks), monthly or semi-monthly. The payment frequency you select affects the amount of your payment and the term of your loan. It can also change the amount of interest you would pay over the term of the loan. Usually the more frequently you make a payment, the less interest you pay and the shorter the term of the loan. For example, if you borrowed that same $10,000 and you made monthly payments of $202.76, the total interest paid would be $2,165.85 and the term of the loan would be exactly 5 years. If you made weekly payments of $50.69 ($202.76 /4), the total interest paid would be $1,932.65 and the term of the loan would be 236 weeks or 4.54 years.

A very important consideration when selecting the payment frequency is the frequency with which you get paid. Do you get paid weekly or every 2 weeks? If you get paid weekly and select a monthly payment, will you be able to keep money aside each week to make your payment at the end of the month? Your payment frequency selection will depend on your financial situation and budgeting needs.

Interest Rate
The interest rate is a very important factor when obtaining credit. Interest rates can be fixed for the term of the loan or variable (which means the rate changes or floats as interest rates change). Selecting a fixed interest rate as opposed to a variable interest rate is a very important decision. A variable rate should be selected if rates will remain steady or are expected to drop. By selecting a variable rate, you face the risk that interest rates might go up during the term of your loan.

Fixed Rate loans lock in the interest rate for the term of the loan. This provides you with a guarantee of what your payments and the term of the loan will be - no surprises. Locking in a fixed rate creates the risk of paying a higher rate as interest rates fall during the term of the loan.

Security
Security (also known as collateral) is sometimes required for borrowing. These terms refer to the item or asset you provide as a guarantee on the loan. Common items that are used as security on a loan include automobiles, investments, savings accounts, stock or bonds. Putting up security on a loan generally lowers your cost of borrowing.

Insurance
Life and Disability Insurance can be very important to most borrowers. These insurance plans provide coverage in the event of death or disability of the borrower. Life insurance should be obtained on all borrowing to protect your estate and family in the event of an untimely death. Disability Insurance can be especially important in the case of couples or families borrowing. If a borrower is disabled and cannot work for an extended period, the loss of income can place a great strain on finances. Disability Coverage, like most insurance, has a cost associated with it. The cost of the coverage must be weighed against the potential benefit. The decision will depend on each borrower's finances, disability coverage with their employer, spouse's income, other debts, etc.

So, as you can see, getting a personal loan involves several decisions. PenFinancial's staff can provide you with important information and help you make these decisions.

Some basic tips:
Don't buy necessities on credit! For example, groceries, personal goods, rent. Pay off your Credit Card bills in full every month. Pay off Credit and Loans with higher interest rates first. Pay off non tax-deductible credit first. Never buy on impulse. Go home and take a day to consider the purchase. If interest on the loan is tax-deductible as in the case of Investment loans, it's cheaper than one that is not tax deductible. Make your payments on time. If you have to borrow to make your payments, seek counseling immediately because you're headed for trouble.