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What kind of credit is right for you?

Your options, depending on how much you need and for how long

No matter how disciplined you are with your budgeting, financial planning and saving, at some point you will probably need to borrow money. 

The largest purchases and expenses can be out of reach for most people, without the help of some kind of loan. Here are some credit options available and what borrowing needs they’re best suited for. 

 

Personal loans 

With a personal loan, you receive the whole amount you borrow, all at once. In many cases, there’s a fixed payment and fixed interest rate for the chosen term.  Another option is a variable interest rate. This means, your payments and your interest rate will be adjusted as the prime interest rate moves up or down.

 

Good for: 

Large one-time purchases such as motor vehicles, recreational vehicles or one-time expenses like renovations or weddings. 

Maximizing your RRSP contributions. 

Consolidating high interest expensive debt like credit cards or department store credit.

 

The Pros:
You can pay a set amount, every month, until it is paid off. 
They can be unsecured, so you don’t have to own a home with equity to get one. 
It’s fast and easy. 
Typically better interest rates than credit cards. 

 

The Cons:
Interest rates are usually higher than Home Equity Lines of Credit (HELOCs). 
They are usually for smaller amounts than a normal Line of Credit.

First Calgary offers personal loans with competitive rates and flexible repayment terms – plus, you can pay it off at any time, without penalties. 

 

Lines of credit 

Typically, lines of credit are much cheaper than credit cards. You can withdraw funds up to your credit limit, at any time. You only pay interest on what you borrow.

Line of credits are available as unsecured or secured by real estate (HELOC).

 

Good for: 
Ongoing borrowing needs.

Unexpected expenses or to have available for emergencies.

Home renovations.

Education costs.

 

The Pros:
Far more flexible than regular loans. You can pay the minimum amount payable (as low as interest only for a HELOC) or a larger sum, all with no penalty. 
Interest is charged on what you use, calculated daily and charged monthly.
The credit can be used for what you want.

 

The Cons: 
For a HELOC, you need to be a homeowner and have equity in your home.
While the interest rate is cheaper on a HELOC, there are costs for setting it up, such as appraisal and legal costs.
If you default, you can lose your home. 
Monthly payments can increase with the variable interest rate. 
Time to process a HELOC is longer than an unsecured line of credit or term loan.

 

First Calgary Financial offers personal line of credits and HELOCs with competitive rates. You can access funds conveniently through your chequing account by using your debit card. 

 

With a First Calgary Financial HELOC, you can get up to 80% of the appraised value of your home, minus current mortgages and liens. *All subject to credit underwriting policies.

 

Mortgage refinance 

If you have various sources of debt and wish to consolidate into one lower, monthly payment, and you own a home, a mortgage refinance can be a good option. Most lenders will allow you to borrow up to 80% of the appraised 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. 

Increasing the availably of cashflow and saving interest.

 

The Pros: 
Consolidate many bills into just one loan and one monthly payment. 

Save a lot of money in interest (mortgage rates are a fraction of most credit card rates). 

Reduce your monthly obligations significantly. 

 

The Cons: 
There are costs for setting up a mortgage, such as appraisal and legal fees.

Your current mortgage payments may go up and you may have to take longer to pay it off. 

 

Credit cards 

If you need to buy something expensive and can’t afford to pay for it all at once, then a credit card is ideal, as long as you pay it off within a short time frame. 

 

Good for:
Unexpected expenses like car or appliance repairs. 

Access to funds to tie you over until your income comes in.

Getting through an expensive time like the holiday season.

Making online purchases, renting a vehicle, booking a hotel, or booking airline tickets

 

The Pros:
Quick and easy to apply for. 

You can earn as you spend. Many credit cards offer points that you can cash in for rewards as well as money-saving perks like travel benefits and extended warranties. 

You can pay just the minimum monthly amount if cash is tight. 

 

The Cons: 
It's important to remember that a credit card is a form of borrowing. You buy now and pay later - and there are risks.
Interest rates are typically high (upwards of 19.99%)
If you carry a large balance, the minimum payments can become difficult to manage and a lot of the minimum payment will go to interest and your balance may not decrease much.
Missing payments will have a serious impact on your credit score. 

 

If you are carrying credit card debt or a high interest payday loan, this is your chance to get it off your back. Even if it’s not enough to completely pay off the whole debt, it will at least make your monthly payments more manageable and free up more cash.

 

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