The U.S. crisis of last decade brought about sweeping changes to the lending landscape, and forever changed the way that the lending of money was carried out. Over-zealous banking and large lines of credit lead to debt crisis that hurt our economy dearly. Since then, regulations have changed, and become more complex, regulated, and monitored. So knowing what kind of loan, or what amount you can get can be pretty difficult. Here’s an outline of some new lending regulations and how they affect you, the consumer.
First, why did they make changes?
Good question. The crisis of 2008 was a result of over-lending, and a lack of oversight from the banks on who they were lending money out to. Simply put, borrowers over-borrowed, and lenders over-lent with little care for how the money was going to be paid back. The Canadian government had the foresight to not make the same mistakes as in the U.S. Therefore, the new regulations make it much more difficult to do this.
What are the new regulations?
The Canadian government’s new regulations have increased the down payments that must be made before you can qualify for a loan, and also decreased the amortization period (the length of the loan). Also, when it comes to home equity loans, there are new limits as to how much can be borrowed. All in all, the regulations were put in place to tighten the lending industry and stabilize the economy.
How do they affect me?
In short, the new regulations mean it is more difficult for you to obtain a loan. You first need to prove that you have the financial means to pay back the loan. From there, the new regulation on home equity loans is that you can only borrow up to 65% of your home’s appraised value on the real estate market.
As far as personal loans such as payday loans, the government of Canada passed new regulation to make it a criminal offence for any lender to enter into a contract at an interest rate deemed too high. This provides you more protection from unscrupulous lenders in the industry.
The overall goal of the legislation has been to limit the lending industry, and avoid a crisis the magnitude of which we saw in the mid 00’s in the U.S. Generally, these new regulations have succeeded in protecting everyone, both consumers and lenders, from potentially disastrous consequences. The new regulations make it more difficult to get home equity loans, have increased down payments, protected consumers from usury, and decreased the length of mortgages, among other things.
At Tribecca, we are here to help. Contact us today for more information on getting your first loan.
