Canadians looking for some extra cash can now turn to the post office.
Canada Post officially launched a new personal loan program in partnership with TD Bank Group. Canada Post says that the new program, called the Canada Post MyMoney Loan, responds to Canadians’ desire for fair, transparent, and more affordable loans.
The product began market testing in the fall of 2021. The goal was to expand it across Canada, and reach Canadians in rural, remote and Indigenous communities.
During testing, Canada Post found that Canadians used the loans for unforseen emergencies like car repairs and pet-related health bills. They also used the money for big purchases. Others consolidated debt from higher interest-rate products.
With the new MyMoney Loan, Canadians can borrow anywhere from $1,000 to $30,000. Repayment is spread out anywhere from one to seven years. Canadians also have the choice of variable interest rates ranging between 9.78% and 19.78%. Fixed interest rates are from 9.98% to 19.98%. There are no fees unless you miss a payment.
There are no fees unless you miss a payment.
To be eligible, Canadian citizens or permanent residents must have a personal annual income of $1,000 or more and to have not declared bankruptcy or had accounts in collections for past due payments in the last 24 months. You do not need to be a current TD customer to apply.
Canada Post MyMoney loan helps Canadians in regions where banks are shuttering branches
James Darroch, associate professor of policy at York University’s Schulich School of Business, said it makes sense that Canada Post is looking to diversify given how their traditional service, namely delivering paper mail, has been on a steady decline.
He notes that Canada is not the first post office to enter the banking business. Post offices in Japan, China and France, for example, also provide banking services to consumers.
Darroch also explained that Canada Post banking services helps Canadians in more rural services. Banking institutions are beginning to withdraw from some of these places.
He said, “TD and other banks can be expected to shutter branches as digital strategies makes them less cost effective.”
The Canada Post is an ideal federal institution to make up for that loss. Currently, there are more than 6,000 post office locations across Canada.
Personal loans isn’t Canada Post’s first financial product. They already offer money orders, reloadable pre-paid Cash Passport Mastercards, and the ability to order foreign currency online.
Canadians should still remain cautious when taking out debt
Canadians should remain cautious that they don’t take out debt that they can’t repay in a reasonable amount of time. With the increasing interest rates from the Bank of Canada, that debt can place a bigger burden in the long haul.
And, those likely to take on personal loans tend to be lower to middle income families who don’t own homes. That’s because homeowners are more likely to take out a home equity loan on their property. These have a lower interest rate than higher interest personal loan, Darroch said.
Consumers can choose between variable or fixed rate personal loans. It is a bet on how high they expect interest rates to rise in the year ahead.
Getting a fixed rate loan can be a good form of insurance against rising interest rates, where borrowers may get stuck paying more interest and less of their principal loan than expected, Darroch said.
Gary Schwartz, president of the Canadian Lenders Association, said the association was pleased to see Canada Post enter the lending space.
“This is an evolving and innovative space and new products and more choices for consumers are always welcome,” he said in an email statement.
Schwartz added that the distinction between incumbent and alternative lending is blurring as more and more offerings enter the Canadian market. “The TD-Canada Post partnership allows the bank to service a new demographic of consumers such as new-to-Canada. We continue to see innovative partnerships established that help Canadians get open access to credit and build their credit score.”
Canadians interested in applying for a loan can do so through an online application or calling a toll-free number: 1-844-229-0413 (English) 1-844-229-0424 (French). Local post offices will also be able to share information about the new loan program.