The uncertainty of life can put paid to the most thought out plans, and unforeseen emergencies that cause a considerable dent in your finances can occur at any time. If you lack the funds to deal with such problems, they can pile up and cause more expensive costs in the future. Situations like this make it imperative to find the best installment loans in Canada.
What is an Installment Loan, and How does it Work?
An installment loan is a loan that you pay off in installments over a typically more extended term and with lower interest than a payday loan. Installment loans use a fixed payment system, allowing both parties to know how much to pay and what to expect at the end of each month.
Installment loans can also serve as an excellent alternative to credit cards with lower interest or if you carry a sizeable monthly balance and find it hard to keep up with the minimum payments. Installment Loans can even serve as a form of debt consolidation.
Some of the uses of installment loans are:
- Personal emergencies: overdue utility bills, health or dental procedures, home or vehicle repairs.
- Important events: post-secondary school support, marriage, birthdays, etc
- Personal reasons: going on a holiday, buying an expensive item, cosmetic procedures, etc
Collateralized or Non-collateral loans
The best installment loans in Canada are either secured or unsecured. A secured installment loan means that you can only take it when you provide collateral in the form of assets like your house or car. A mortgage or an auto loan are excellent examples of a collateralized loan because the home and car serve as security for the loan.
Where you default, your lender can confiscate these items to recover their funds. These categories of loans have a lower interest compared to loans without security. Non-collateral loans, on the other hand, do not have any security.
There isn’t any collateral to back up the loan, and lenders charge a higher rate to compensate for the increased risk. If there is a default, the lender has no collateral to repossess.
Best Installment Loans
In other words, the lender recoups the investment through a higher interest during the term of the installment loan. Below are some of the best installment loans platforms in Canada:
Mogo is a unique installment lender as one of the few companies to allow borrowers to try loans for 100 days before committing. That means, if you regret taking out the loan, you can return it within 100 days so long you pay the principal sum.
You won’t find many installment loans in Canada providing borrowers such wriggle room. You can also download the MogoApp as it gives tips and strategies to tidy up your finances.
- Loan sum: C$500 to C$350,000
- Interest rate: 5.9% to 45.9% APR
- Loan Duration: twelve months to five years
LendingMate is an excellent option for consumers in need of a loan but with a bad credit score. LendingMate doesn’t check your credit score but allows you to put up a guarantor.
This guarantor must be a Canadian citizen between the ages of 19 and 75 with excellent credit, strong credit history, or a homeowner. The guarantor must affirm your ability to pay off the loan or undertake to make the payments if you default.
- Loan sum: C$2,000 to C$10,000
- Interest Rate: 34.9% to 43% APR
- Loan duration: Twelve months to five years
Loans Canada is a loan search platform that provides loans to applicants regardless of their credit score. The lender takes the time to source multiple loan options that are based on your application.
- Loan sum: C$500 to C$300,000
- Interest Rate: 3% to 46.96% APR
- Loan duration: Ninety days to five years
One of the things LoanConnect has in common with Google is that it’s a search engine.
However, unlike Google, LoanConnect specializes in searching for unsecured installment loans, allowing you to compare lenders to find the ideal rate – with some interest rates as low as 10%.
The lenders are all vetted and verified and prefer to offer a quick loan turnaround.
- Loan sum: C$500 to C$50,000
- Interest rate: 10% to 46.96% APR
- Loan duration: six months to five years
How to Choose the Best Installment Loan in Canada
There are so many installment loans online that it’s often difficult to find the right loan for your needs. Ensure you carry out proper research by checking out multiple installment loans instead of signing up for the first loan you come across.
Some borrowers resort to installment loans online because they are in dire need of funds. However, this can turn out badly when they fail to read the fine print and end up drowning in debt. Follow these tips to find the right loan:
Focus on the APR instead of the interest rate
The Annual Percentage Rate (APR) is the interest you pay over one year and includes other financial charges or additional fees. The APR is a better cost assessment than a listed rate, so you need to find a loan with the lowest APR.
The time it takes to get the loan
It would be best to determine the length of time it takes to receive the fund from the time you apply until you receive the funds. If you have an emergency, ensure the loan will arrive quickly to take care of your expenses.
However, you’d need to be wary because speedily given loans often have higher rates and more expensive fees that others do not have.
Consider the loan duration
Loans with a longer-term appeal to most borrowers because of the convenience of time to repay the loan. Nonetheless, a loan with a longer-term can leave you paying a lot more than you intend.
Often, you might end up paying almost double the principal sum once you factor in the interest rates. Rather than going for the most prolonged termed loan you can find, calculate how quickly you can pay off the funds you want to borrow and go for the shortest term possible.
How to Apply for an Installment Loan in Canada
- Carry out due diligence to find the right lender
- Fill the application form
- Wait for your application to be approved and receive your funds. Many lenders provide rapid loans, and you may receive the money within 24 hours.
Lenders also have different document requirements they need from applicants. Some may want a good credit score, while others may ask you to bring a surety.
In sum, lenders will need income proof, government-issued ID, active bank account, and Canadian citizenship or permanent resident proof. In Canada, the minimum age to take a loan is 18, so you need to provide documentation that confirms your age.
Installment Loan Benefits
- Installment loans in Canada have a fixed rate, and this rate will remain the same despite fluctuations in the market
- Installment loans are outstanding for emergencies because of the easy application process and the fast rate of receiving the funds – often within 24 hours.
- Borrowers may collect significant funds, leading to a debt trap for people who aren’t earning enough to cover the debt.
- Borrowing more money isn’t as straightforward as asking for additional credit, just like you would with a credit card. Installment loans are fixed loans, and additional funds are unavailable at a future time.
Who needs an Installment Loan?
Installment loans aren’t for everyone. The loan is an excellent option for Canadians who need to borrow significant sums of money in quick time regardless of their credit score. Installment loans make sense where the borrower pays off the loan on time because it can improve their credit score.
Installment loans are also handy for borrowers trapped in a payday loan. Many people rely on payday loans to sort out expenses, and once it’s paid off with the high interest, they run out of cash and need a fresh loan.
Installment loans have a longer moratorium with less interest and are ideal for borrowers who want to escape the vicious cycle of a payday loan.
Installment Loan or Personal Loan?
Installment loans are, and personal loans are essentially the same thing. Both are often used by borrowers looking for extra funds to cover big purchases, renovations, repairs, or unforeseen emergencies.
However, installment loans usually have fixed interest, while personal loans either have a fixed or variable rate. Installment loans typically have a higher interest and APR but are easier to obtain.
Installment loans may be easy to access, but you still need to ensure you can pay off the loan before applying for it. It is often a temptation to borrow huge funds and go on a dream holiday but ensure you cut your coat according to your cloth.
So far, you have a dependable source of income and are financially responsible; installment loans might be the financial solution you seek.
Can I pay off my installment loan in a shorter time than the specified term?
Of course, you can. By putting more money into your monthly payments or paying it off at once, you can discharge your loan without receiving any penalty. Still, a lot will depend on the terms and conditions of your loan.
Can I have multiple installment loans?
You can have more than one installment loan if you can prove to your lender your ability to pay off both loans.
Can I apply for an installment loan with bad credit?
Yes, it is possible to obtain an installment loan with bad credit. These loans may have higher fees, but you can receive funds regardless of your credit score.