Installment loans in Canada
Installment loans are a quick, easy, and fast method to get loans in Canada. Whether you are running late on your bills, or you have an emergency home repair to take care of, installment loans are a great financing option.
Getting an installment loan here at NorthStar Brokers is straightforward. All you have to do is fill out the simple application form on our website, wait for approval, and have your money deposited in your account in less than 24 hours.
What are Installment Loans?
Installment loans are personal and commercial loans that the borrower repays within regular schedules (installments) and set amounts. The amount one can borrow ranges from $300-$3,000 but can go up to $25,000. These loans range from short-term (6 months) to medium-term (5 years). They are also unsecured, meaning to secure them, you don’t need collateral.
How Do Installment Loans Work?
Unlike a line of credit, like a credit card where you can borrow and access portions of the approved loan at a time, with installment loans, the borrower gets a lump sum of the money on approval. The borrower is then to repay a set amount biweekly or monthly. This amount is to be discussed by the lender and borrower before signing the loan.
What are Installment Loans Used for?
Just like any other loan, installment loans are for offsetting financial obligations. Therefore, you will see installment loans covering emergency expenses, medical bills, car repairs, consolidation of debt, paying utility bills, financing appliance purchases, vehicle financing, moving costs, home remodeling, among many other uses.
What do You Need to Apply for an Installment Loan?
When applying for an installment loan in Canada, you will need :
- your government ID;
- proof of source of income ( tax slip, employer verification letter);
- and a checking account.
Decision Drivers
Take the time to research the different installment loan options that lenders have to offer. Doing this research will enable you to find a lender that best meets your financial needs and ability to pay. These 5 factors should guide you on whether to take an installment loan with a lender.
- Principal amount
Whatever you need the installment loan for, it is best to first use your savings or/and income to handle your finances. From there, whatever is short you can borrow. It will save you from paying high-interest rates compared to borrowing the entire amount from the lender. You should know the principal attracts interest as soon as you take it out.
- Length of loan
Depending on the type of installment loan you take, the length of repayment of the loan will determine the overall cost of the loan. Since different installment loans have different loan lengths, it is best to discuss with your lender before taking the loan.
Note that low repayments come with a prolonged repayment period. However, this attracts higher interest rates, and the overall cost of the loan will be higher. On the flip side, larger repayments attract lower interest, and the final price of the loan is lower. With sizable repayment plans, you may face difficulty making monthly repayments. So weigh out your options and see which one will serve you best.
- Disbursement
How long does it take to get your money after approval of your installment loan? If you want same-day disbursement, your loan will attract higher fees. The standard 1 week that most installment loan lenders give carries lower charges. So, analyze your situation critically to see if you have time to wait.
- Interest rates
Evaluate the interest rates you will pay for your installment loan. If possible, shop around and compare the rates on offer by different lenders to get the best offer. Higher interest rates will cost you more, so shop for favorable interest rates.
- Fees
Though you may find competitive interest rates, be sure to look out for hidden fees. These include origination fees, administration fees, appraisal fees, processing fees, underwriting fees, and credit report fees. They will add to your monthly repayment and increase your monthly repayments. To avoid sneaky hidden fees, you can opt for a slightly higher interest rate instead of paying large amounts of monthly installments or upfront fees.
Key Benefits of Installment loans in Canada
An online installment loan may not be the best personal loan option. However, it still has its benefits, which include:
Speed
Installment loans are fast to access compared to other forms of personal loans. Given the online nature of these loans, approval takes less than 1 hour, and funds are credited to your account in less than 24 hours.
Available with poor credit
Installment loans are accessible to people with poor credit, as long as the borrower shows the ability to repay. It is unlike traditional loans, where the borrower has to have a good credit score.
Manageable and flexible repayment options
With payday loans, you pay in full on your next pay date without fail. However, installment loans are designed like personal loans. So, a borrower can choose the loan term and sometimes the loan repayment frequency (either bi-weekly or monthly).
Higher loan amounts
Installment loans offer higher loan amounts. In case you have a costlier emergency, you will have the funds to handle the situation comfortably. Coupled with manageable repayment options, it reduces your risk of taking out multiple loans to gain enough funds to handle your emergency.
Application in a day
Traditional lenders operate within business hours, whereas installment loans operate 24 hours round the clock. As a borrower, you can send your online loan application any time, and you do not have to wait until a bank opens in the morning to fill your application. All you need is a computer and internet connection to apply for a loan.
Drawbacks of installment loans in Canada
Although installment loans have their advantages, they still have some drawbacks. These drawbacks include:
Interest rates
Qualifying for an installment loan is easy and doesn’t need the borrower to have collateral. It means the lender bears the risk in case of default. So, to cover themselves, lenders charge very high-interest rates.
Higher repayments
Installment loans offer higher principal amounts than payday loans. In terms of the cost of repayment, from a principal perspective, this makes the principal repayments higher.
Fees
Some installment loans attract fees like origination, administration, affiliated fees, among others. These fees add up, and the borrower has to pay them.
Alternatives to Installment loans in Canada
Installment loans come with an acute interest because they are unsecured, and the lender has to bear the risk. However, there are alternative loans out there that a borrower can access.
Secured loans
These types of loans require that the borrower has collateral. In case of default, the lender can sell the collateral and recoup their money. These loans have lower interest rates, and lenders approve them quickly.
Home equity
If you are a homeowner, you can use the equity of your home to borrow money.
Credit unions
Compared to traditional financial institutions, credit unions offer better rates on loans. If you have a checking account with the credit union, you can even score lower interest rates.
What the Numbers Say
According to a survey done by PwC, 42% of millennials have taken “quick-cash” loans such as payday loans. They took out these loans mainly to pay off student debt. Although data on installment loans are not readily available, the trend is almost similar to that of quick cash loans.
Installment Loans Frequently Asked Questions
According to a survey done by PwC, 42% of millennials have taken “quick-cash” loans such as payday loans. They took out these loans mainly to pay off student debt. Although data on installment loans are not readily available, the trend is almost similar to that of quick cash loans.
What is considered an installment loan?
Any loan where you borrow a lump sum of money and repay a fixed amount (installments) over some time is an installment loan. Types of these loans include personal term loans, car loans, typical mortgages, among others.
Can I get an installment loan with bad credit?
Yes, you can. Installment loans for bad credit are available, however, fewer lenders are willing to offer you money. This means you also pay higher interest rates compared to borrowers with good credit.
What interest rates should I expect on an installment loan?
Interest rates will largely depend on your credit score. The other factor will be your lender. With traditional financial institutions like banks, if you have a good credit score and collateral, they will loan you at 4-7%. However, the process is slow and has more scrutiny.
If you want a quick, less judgmental route, then alternative lenders will do. Their interest rates vary from 6%-13%. In case you have bad credit, the interest rates can go as high as 40%
What is the difference between a payday loan and an installment loan?
The main difference between these two loans is the terms of repayment. With a payday loan, the borrower has to repay on their next payday. The repayment period is between 2 weeks or a month and rarely goes above this period in Canada.
As for installment loans, the repayments are usually monthly, drawn over months, or sometimes years.
Can I get an installment loan in Canada with no credit check?
Installment loans no credit checks are available. However, be sure to research the lenders’ no credit check installment loans since lenders have different meanings to this term.