How to open a Bank Account in Canada
Having a loan application rejected as a result of not having a Canadian bank account is disappointing—but it is not something to lose sleep over. Many people who have had their initial loan applications rejected as a result of no bank account were eventually able to become eligible for a loan, and there’s absolutely no reason why you can’t do the same. Most probably, right now you are just one step away from getting the money you need, and we will show you how you can cross this small hurdle, get an account set up and receive your loan.
You may become eligible for the loan you’ve just applied for by opening a necessary bank account where the funds can be deposited by your lender. It’s quite simple to open a bank account, and you’ll likely still be eligible even if you’re living from one paycheck to another.
In case you don’t want to open a bank account, you can explore other loan options discussed in this post. There are several types of personal loans that don’t require a bank account. So, either way—with or without a bank account—you have several loan options in front of you. By learning more about them in this post, you’ll be able to make an informed decision.
In this post, we will cover these topics:
- Why a bank account is helpful when you apply for a personal loan?
- What it takes to open a bank account?
- What other loan options are available in case you don’t have a bank account? So, let’s get started…
Why Do I Need a Bank Account?
Nowadays, most lenders, if not all, provide the loan through electronic fund transfer (EFT). You’ll need a bank account in Canada to receive the loan amount after your loan application has been submitted, accepted and processed.
However, a bank account helps in other ways, too. Lenders offer different types of personal loan plans, with some having lower annual percentage rates of interest and fees than others. When a lender perceives a borrower as low-risk, they’re more prepared to offer the borrower a cheaper loan plan.
A bank account gives you the opportunity to show the lender that you earn regular income and manage your personal finances efficiently, which could lead to a lower interest rate and potentially better loan terms altogether.
It is much better to open a bank account than to not have one even when your credit rating is poor. Some lenders take a bank account as a sign of financial stability and might be willing to offer you more favorable terms.
So, in all situations when you need a personal loan, having a bank account helps. Opening a bank account in Canada is fairly easy, even if you’re just getting by. Many banks are willing to open a checking account with a nominal deposit of $5 while a few don’t even require that.
How Do I Open A Bank Account?
First, decide which type of bank account you want to open—checking or savings. The difference between the two is in the intended use. The documents required for opening both are usually the same.
A checking account is designed for paying bills and covering everyday money transactions, like buying groceries or gas. It might require an opening deposit—although often this can be nominal, $5 for example. There’re no withdrawal restrictions, or nominal amounts on checking accounts, but they usually don’t earn any interest, either.
If you need a bank account for daily use, go for a checking account.
Do you want to open an account to save money for a specific purpose? If yes, a savings account is what you need. This kind of account is designed for minimal access and that’s why they have withdrawal restrictions. You can withdraw up to a specific number of times per month—usually 3-6 times—and up to a specific portion of the total amount. A saving account earns interest, but the interest rate varies from one bank to another.
Documents Needed For Opening a Bank Account
Once you’ve decided the type of bank account you need, you can visit the selected bank in person or logon to their website. You’ll need the following documents to open a bank account in Canada.
- ID Proof – Driver license, Social Security Number, Birth Certificate, or Passport
- Address Proof – Utility bill or lease in your name
- Deposit – This varies from bank to bank and typically ranges from $5 to $100
Note: If you are opening a bank account online, scan the relevant documents and attach them with the form. If the account requires a minimum deposit, use your credit card or someone else’s account to make the initial deposit.
What Loan Options Are Available If I Don’t Open a Bank Account?
Several loan options don’t require you to have a bank account in Canada. However, typically these loans are expensive. Some of them require collateral and some don’t. Let’s look at the popular loans that you can get when you don’t have a bank account.
A payday loan is a short-term loan with a high interest rate that you typically need to repay on your next payday. If you need a small short-term loan, you can consider taking a payday loan.
- Maximum Loan – This varies from lender to lender. Typically, traditional payday loans let you borrow up to $1,000.
- Typical Annual Percentage Rates of Interest – Usually, it is 17 percent
- Processing Time – 1 to 2 days.
Auto Title Loans
This is a type of secured loan in which you put up the title of your car, and not the car itself, for collateral and borrow up to a certain percentage (typically 50 percent) of your car’s value.
This means that you can use your car just like before during the repayment period. Once you have paid the loan in full, the title is returned to you. However, if you fail to pay the loan amount, the ownership of the car will be transferred to the lender.
Just like the payday loan, the auto title loan is for a short period of time, typically 30 days.
- Maximum Loan – This varies from lender to lender. Typically, you can borrow up to 50 percent of the resale value of your car.
- Typical Annual Percentage Rates of Interest – Usually about 50 percent
- Processing Time – 1 to 2 days.
If you need to borrow a small amount, you can borrow a loan against a valuable with good resale value, like gold, jewelry or electronics by putting it up for collateral.
The maximum amount you can borrow is usually anywhere between 30 to 60 percent of the item’s resale value. Pawn loans are not as expensive as a title or payday loan, but the total amount you can borrow is also considerably less.
- Maximum Loan – Typically, about 60 percent of the resale value of your asset.
- Typical Annual Percentage Rates of Interest – This varies widely. However, pawn loans are considerably cheaper than a title or payday loan
- Processing Time – Usually one day
To sum it up, if your loan application has been rejected because you don’t have a bank account in Canada, the best way to have it approved is by opening a bank account.
Having a bank account makes you eligible for better loans, terms and potentially interest rates.