Businesses are looking to fill a gap in the marketplace, with many looking to consolidate their personal loan portfolios, but they may have to pay more upfront to do so.
The latest research shows that consumers who take out a loan on their own will be paying more than those who take on a business loan.
More than half of Canadians who take personal loans will be spending more on a monthly loan than they would pay for an average business loan, according to a recent report by the National Association of Home Builders.
BMO’s research found that those who took on a personal loan on an average of $30,000 annually on average would pay $17,700 a month in interest over 10 years.
That would mean they would need to pay $19,000 more in interest than they will for a business mortgage, according the report.
Those numbers may seem alarming, but for many, the reality is a bit more prosaic.
The average home buyer with a personal mortgage costs a total of $2,086 annually, according a report from Canadian Real Estate Association.
That includes the interest.
A $1,000 down payment can cost anywhere from $50 to $200 a month, depending on your credit score and the market, according in the report from CMHC.
For those who don’t qualify for the lower monthly rate, they may still pay interest on the loan over the life of the loan, or even longer.
With many businesses facing increased competition in the home-building space, those who are already in the game are finding ways to leverage their personal credit score.
There are a number of services on the market that will help consumers save on interest, but it’s important to understand that a loan isn’t a business deal.
For that reason, the CRTC has a simple rule when assessing whether a loan is a business investment: it must be structured so that you don’t have to make a profit on it.
“If it is a reasonable investment that the average consumer can afford to make, then it is not a business-related loan,” said David McLean, the CEO of the Canadian Real estate Association.
However, in the past, the finance sector has struggled to accurately assess the costs associated with a business and whether it is in the best interests of the consumer.
As of August 2018, there were more than 9,500 loans in Canada under CRA review.
Of those, about 6,500 were business-based loans, according CRA.
The majority of those loans were loans from financial institutions and were made for personal reasons.
It’s not clear how many people have taken out a business payday loan, but BMO said the average payday loan was about $5,000 and the average interest rate was about 4.8 per cent.
On average, the average home borrower would pay about $25,000 on a payday loan.
The average loan balance would be around $1.5 million, with the average borrower having $8,500 in outstanding debt.
If you’re in a business, you can use a personal-finance website like Home Capital or Prosper to apply for a personal payday loan in Canada.
To find out more about personal payday loans, click here.