For many, banks are the ultimate and only choice for a home loan in Canada because other private lenders are considered incompetent and costly. But that is just another myth like many others. Although, these myths are still based on some truths.

Cases where private lending agencies have failed to meet their promises, are not rare in Canada, but many have now exited the market. Now, you will mostly find competent and experienced lenders in the market, making it easier for you to choose among the best ones.

Take a look at some other myths before you avoid them.

Myth 1: A private home loan costs a fortune

Truth: A private home loan in Canada is undoubtedly more expensive than the one from a bank, but it is still cost-effective because you can obtain a loan faster than you would with a bank. Cheaper options are also available, and a comparison website will help you choose.

If you are smart enough, you will also find many loans with discounts, sometimes making them more cost-effective than a traditional loan.

Myth 2: You should only go for a private lender only when desperate enough

Truth: There’s absolutely no reason you shouldn’t go for a private lender as a first choice. Other than the fact that private lenders focus on the overall value instead of your(borrower’s) credit history, they are no less competent than a bank.

You will be surprised to know that many renowned business owners or individuals invest in private home loans, not as a last resort, but probably as a first or, sometimes, only a choice.

Myth 3: Private loans have illegal sources

Truth: One of the most common myths associated with private lending is that they are unethical and provide loans illegally. The truth is far from this because private lenders, too, are regulated even though not as strictly. Besides these, provincial lending regulations also apply to the private lenders, and to make the process more secure, commitment drafts by lawyers require the signatures of both the borrower and the private lender.

In fact, you will find that many private lending agencies or companies are owned by individuals with law, banking, and accounting, backgrounds. However, just like doing business, it is important to research your potential loan lender beforehand.

Myth 4: You can apply for more than required without consequences

Truth: Money matters are always risky - even when it means obtaining a loan from a private lender. A private lender might have less strict regulations as you get a loan from them, but that hardly means you can mess up your installments without a long-term burden.

There have been many cases where people apply for a higher amount than the necessary amount because their eligibility allows it. One of the many reasons includes the money required for paying off the first installment and processing fee.

Conclusion

Although it is believed that acquiring a private home loan in Canada is easier than traditional loans, there are specific requirements that you cannot avoid. One of the common requirements is that you have to be a Canadian citizen and live in Canada. Sometimes, your eligibility also requires you to purchase a home in a place with over a certain number of people. Although, that may be different for different agencies.