Understanding Fundamental Loan Differences

There are many reasons you may need to borrow money such as remodeling your kitchen, buying a new car, paying off credit card debt, helping the kids pay for university or making a major purchase. Depending on your borrowing need, here are some options to consider on your loan or line of credit.


1. Closed-end loan vs. open loan

Fundamental difference: Open loans don't have any prepayment penalties while closed-end loans do. In other words, if you try to make a payment other than the exact monthly payment, you'll be charged a fee if you have a closed-end loan but not if you have an open loan.

CIBC offers only open loans, meaning you can prepay any amount of the loan that you wish without incurring penalty fees. You can also choose to pay the loan off in one lump sum or even adjust your payment schedule, allowing you flexibility and freedom in your repayment plan.


2. Secured loan vs. unsecured loan

Fundamental difference: Secured loans mean your loan is backed by collateral such as your house or investments whereas unsecured loans are not backed by any collateral.

Of course, there's a little more to it than that. Here are some quick comparisons of secured and unsecured loans:

 

Secured loans

Unsecured loans

Requirements

  • Acceptable security
  • More paperwork to complete as the value of the collateral must be assessed and verified
  • No security required
  • Higher credit score
  • Less paperwork and a faster approval period

Interest rates and payment options

  • Lower interest rates
  • Interest-only payment option
  • Slightly higher interest rates

Types of loans available

  • Mortgages
  • Home Power® Plan Line of Credit
  • Personal loans
  • Car loans
  • Personal lines of credit
  • Personal loans

Even as a homeowner, you do not have to secure every loan you apply for. For example, if you need fast cash or a smaller loan amount, you may prefer the expedient application process of an unsecured loan. You could be approved in as little as 20 minutes.

On the other hand, if you're taking out a large loan, you may be more interested in getting the best possible interest rate and repayment options that work for you. In this case, a secured loan would meet your needs.


Apply for a loan with CIBC

Now that you have this basic knowledge, you can apply for a loan that suits your needs and budget. To get started, apply for a loan or line of credit online. You can also contact a CIBC advisor at 1-866-294-5964 if you have more questions about your lending choices.