What are Installment Loans in Canada
Whether you are new or old to personal finance, chances are you have come across the term installment loan. However, what is it exactly? An installment loan is a type of financing structure that provides the borrower with a lump sum upfront. Once approved, the borrower repays the loan through regular payments or installments over time.
If you would like to get an installment loan, you should not only consider the product itself but the lender as well. To learn more about installment loans continue reading below
What Is An Installment Loan in Canada?
An installment loan is a type of financing that is repaid with regular and continuous payments. the approved amount of loan will be provided to the borrower upfront and the borrower will be responsible for making weekly, bi-weekly, or monthly payments. The installment loan ranges anywhere between six months to 35 years since a mortgage is technically an installment loan. But, more often than not, when we discuss installment loans, this is about personal installment loans. The loan term for these is much shorter, usually no more than five years.
Installment loans are typically used when a large amount of money is needed and the individual will need a long amount of time to repay it.
Types Of Installment Loans
Most types of loans are considered installment loans since it is such a common form of financing. Below are the common examples of installment loans. Installment loans can be either be secured or unsecured.
Mortgages
Personal loans
Cost Of An Installment Loan
The cost of an installment loan will depend on the lender’s specific terms and conditions. You can find detailed information about the costs of the loan contract extended by the lender. The costs should include the following details:
Interest Rate. This is the percentage rate you will be charged for borrowing money.
Annual Percentage Rate (APR). This is the percentage rate you will be charged for borrowing money expressed annually.
Fees. Early repayment penalties, Origination fees, and late repayment fees are common.
Before you proceed with an installment loan, you should take a minute to consider the check on the advantage and disadvantages of an installment loan to determine if the loan product aligns with your financial goals.
Pros
Low Credit Scores: For as long as you were able to justify or demonstrate responsibility with debt repayment and the ability to make payments, low credit scores are okay.
Quick Approval Times: The installment loan approval rate is faster compared to a different type of loan because the application can be completed online.No in-person meetings are required with installment loans either. On the other hand, the approval rate for other types of financing can take weeks.
Comfortable Repayment. Payments are arranged on a scheduled date and the borrower has more control over the term’s length and payment frequency. This will allow the borrower to select a repayment structure that may suit their finances.
Cons
Miscellaneous Fees. There are some borrowers that are surprised by hidden fees such as early repayment penalties or origination fees.
High-Interest Rates. These loans are designed for individuals with poor credit, expect a higher interest rates for the trade-off. In the lender’s eyes, having poor credit or low credit score they will consider you of risk borrower so they charge a higher interest rate to compensate.
Where Can You Get An Installment Loan?
Applying for an installment loan is easy. The hard part is going through different lenders and selecting one that will work for you and your finances. Make some research on installment loan lenders in your area. Once you find the best lender, there are some online lenders that you can apply online or at their branch, if they have one. Either way, once you get approved you will get money in your hand within a day or two.
How to Find the Best Installment Loan Lender
Because of the explosion of private online lending, there are several lenders have entered the installment loan market. While having the right choice is great, it can be difficult to sift through thousands of potential lenders. When you do your research for installment loan lenders, consider the following factors:
Assess Your Finances. You should assess your finances first before shopping for installment loans and lenders. If you know what you need financially, it can be a lot easier to narrow down your options.
Reputation. Check and read customer reviews, testimonials, and other information about the lender both on external sources. If many consumers have had a positive experience with the lender, your chances of having a positive experience as well are higher.
Communication. When you reach out, how do they respond? Are they fast and positive? Or are maybe they passive and take their time? The way the lender communicates with you is a good indicator of how they will behave if you proceed to work with them.
Go Local. Even though there are installment loan lenders all over the world, your life will be a lot easier if you go local because you may narrow down your search plus you may know someone who was able to receive their services.
Terms. Once you get more serious about potential lenders, you will soon receive a loan contract. Be sure to read, review, and understand the terms and conditions to ensure that it is something that you’re comfortable with and can handle financially. If you want to change something, reach out to the lender to determine if it is possible. If you can, reach out and get some comparison to a few lenders for comparison and negotiation purposes.
Is an installment loan better than a payday loan?
The key difference between an installment loan and a payday loan is the loan terms. Installment loans have longer repayment periods between 6 months and 5 years. Payday loans have quick loan terms, usually between 2 and 4 weeks. Most individuals find it very difficult to repay an entire loan in 2 to 4 weeks. For this reason, installment loans are specifically considered the better options because of the repayment process is much more comfortable for you and your finances.
What do I need to qualify for an installment loan?
Every lender is different, but there are some common requirements that all lenders need for approval. These requirements include:
You should be a Canadian citizen or permanent resident of Canada
18 years of age
With an open bank account
Proof of income
In addition to the above, there are some lenders who will look at your credit history, employment status, and income to determine if you qualify for a loan. Installment lenders are flexible with credit scores. They just simply want to assess how you have repaid the debt in the past
Can I get an installment loan with bad credit?
Yes. the fact that most installment loans are designed for people with bad credit. When you are researching lenders, make sure that you find a lender who is willing to work with your circumstances.
Is An Installment Loans Right for Me?
The best way to distinguish if an installment loan is right for you is to assess your current financial situation, your needs, and your goals.
