Child Tax Benefits Possible From Loans

The goal of the current Canada Child Benefit is to assist families with children to maintain an equitable standard of living by reducing poverty. Distributed monthly as a tax-free benefit to qualified families, it's possible to arrange for loans on child tax should the need arise. Here are some basics that you should know about how loans on child tax work and how to receive this type of loan.

Start with the Amount of Benefits You Receive

The latest structure for the benefit went into effect in 2016. The amount you receive is based on the number of children you have, their ages, and your other sources of income. All these factors will also have some impact on your loan.

Verify the benefits you will receive before attempting to apply for a child tax loan. Keep in mind that if you have a child who will move into the next age bracket in the coming year, that will have some impact on the lender’s decision. That’s because the idea is to ensure applicants can repay their loans without creating additional financial hardship.

Factor in Your Eligible Income from Other Sources

The child tax benefit includes maximum amounts that you can receive per child based on age. Your other income also influences the amount you receive under the current child tax law. Add the total of your income from employment, any assets you have that generate interest, and all other income that you receive on a consistent basis.

Lenders will compare your overall income, including the child tax benefit, with the types of expenses you regularly incur. That includes rent, utilities, food, clothing, and transportation. You should also include information about childcare expenses. Remember that transparency is your friend when you seek to work with any lender.

Understanding the Loan Process and Your Employment History

Lenders who offer loans on child tax benefits will have an interest in your employment history.

Along with your credit score and the amount of child benefit income you generate, stable employment is important. Having even a couple of years of consistent employment with the same company translates into a lower risk of missing a repayment installment. Proof of your income and the duration of your time with the company will increase the odds of being offered a loan agreement and receiving an amount that’s based on the child tax you receive monthly.

Your Credit History Matters

As with any type of cash loan, your credit history will be a factor. You don’t need perfect credit to receive a loan with reasonable repayment terms, including loan interest. What you do need is a credit history that confirms you’ve done a good job managing your credit over the last couple of years. In short, what you’ve done lately will carry more weight than some credit issue you had six years ago. If you have a good history, there’s a better chance of being approved for the loan amount that you’re seeking.

Remember to collect credit histories from more than one agency. You have no way of knowing in advance which of the two major agencies the lender will consult. Never assume your history is the same on all three. If you review the histories and see information that’s outdated or not applicable to you, working to bring those histories up to date will likely increase your credit score.

So Does Your Current Debt to Income Ratio

Expect the lender to take a close look at all outstanding debt. That includes the amounts of any credit card balances and other unsecured debt that you’re carrying. The approval process is easier when the loan provider is sure you have sufficient income to continue making timely payments on your other debts even as you make all of your loan payments on time. Remember this is not exactly like a cash advance, in that you do have a series of installment payments to make. They should fit comfortably into the household budget.

You may find that your debt is somewhat high for your income level. If that’s the case, you can optimize the odds for receiving a loan by paying off some of that debt over the next several months. At that point, a lender who was hesitant to work with you before will be more likely to give the application serious consideration.

Supply Copies of Your Tax Returns

You already keep copies of your tax returns. That information is part of the documentation that you need to receive the tax benefit in the first place. Some of the information found there will be of interest to the lender.

If there is any question about any of the tax filing documents you’ve submitted in the last few years, make sure that you have responses. Lenders who approve loans on child tax benefits trust you to provide complete disclosure in all your financial dealings. The ability to show that you fully report income on your returns is seen as a good sign.

As you begin to look for a loan based on the child benefits that you receive, make it a point to research lenders as well as brokers who help people find lenders. Your goal is to ensure that the effort to find the ideal lender remains focused at all times. Check into the lender’s history and confirm that past clients are happy with the terms and conditions they received. Make sure the lender has a strong history of customer service and support. Be mindful of lenders who seem to charge a fee for everything from payment processing to sending a second copy of an account statement through the post or electronically.

The plan is to secure a loan that helps you deal with a need while also allowing you to take proper care of your children. Once you are sure a certain lender is trustworthy and reliable, prepare and submit an application. In the best-case scenario, you request for a loan will be approved and the money will be in your account quickly. 

Manage the loan responsibly and receiving future loans on child tax benefits will be all the easier.



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