Private lenders across Canada offer various loan types, all with their own terms and conditions. Below are the most common loan types you may be offered through a private lender.
Private Mortgages
Private mortgages are typically short-term loans offered by private syndications, independent lenders or individuals used to purchase a home. Because these loans are generally short-term, their amortization periods last anywhere from six months to three years. Private mortgages are funding options for borrowers that are unable to qualify for funding through traditional banks or public lenders, but they will come with much higher rates and are generally interest-only—meaning your payments only go towards interest until the term is up, not the principal amount. Additionally, private lenders may give you a mortgage value based on the value of your property rather than your income.
It is important to remember that private mortgages should be viewed as temporary solutions for your housing situation. Individuals or families utilizing a private mortgage program should make sure they have a clear, achievable exit strategy before signing a loan agreement.
Private Auto Loans
Rather than lease a vehicle through a dealership, consumers can turn to private loans to finance their purchase of a vehicle outrights—and end up owning the vehicle at the end of their term. These loans typically come with an installment plan to pay back the funds borrowed over a specified time period.
Private Student Loans
Students that are seeking funds for post-secondary education may not be eligible for direct funding from the provincial or federal government. In these cases, students can turn to private lenders to fund their education. Depending on the terms of the loan, students will receive their funds in two equal installments, typically sent to the university or college they are studying at. Any leftover amounts will be credited back to them.
Note that private student loans do not come with the possibility of grants like public loans do, unless you have an arrangement with a family member, for example. In many cases, it is better to look into financial aid programs offered through a university or college before seeking a private student loan.
Personal Installment Loans
A personal installment loan is a loan where a borrower receives a set amount of funds from a private lender and agrees to repay it over time through a series of set, regular payments. Unlike a line of credit or other revolving loans, installment loans have a fixed payment schedule and a set end date.
Each installment amount will include a portion of the principal borrowed, as well as interest and other applicable fees. Note that installment loans can be either secured or unsecured, depending on the lender and the terms of the loan arrangement.
