Installment loans are financing options that have a fixed number of repayment schedules. Typically, the borrower gets all the funds in a lump sum and repays in weekly or monthly intervals. Every month, the borrower pays back some of the principal together with interest. The amounts payable every session depends on the terms.
Most Canadian lenders advance anywhere between $500 and $25,000 to their customers. This is depending on the borrower’s credibility. The payment duration often ranges between 6 months to 5 years. Installment credit does not require any security or collateral. However, the borrower must repay the loans within a fixed period to avoid penalties.
Recent trends show that…
Installment loans are very popular with millennials. A recent survey by the PWC indicated that 42% of the millennial respondents had taken a personal or installment loan over the past few years. Similarly, data from the Financial Consumer Agency of Canada indicates that individuals aged between 25 and 55 take 72% of all the installment credit dispensed. Most borrowers use loans to clear student debt or medical expenses.
The PWC survey revealed that 70% of those who take personal loans benefited from the extra funds. They also noted that it improved their financial literacy and responsibility as they learnt to exert restraint on their expenditures. The respondents cited the quick release of funds and low-interest rates as the motivation for seeking installment loans. These trends show that installment credit can be a valuable resource to segments of Canadian society that struggle to access bank credit.
Basic requirements for Installment loan Canada
- Proof of income: Most lenders request payslips, tax returns or some other documents validating your source of income. However, you do not need to be informal employment to qualify as other proof such as receipts from part-time jobs, pensions, disability income, and welfare benefit receipts also count.
- Age verification: the Canadian government and provincial authorities require applicants for loans to be aged 18 and above. Therefore, the lender will request a copy of your ID.
- Bank account: the lender will require you to provide details of an active bank account in which they will deposit the funds.
- Proof of Canadian citizenship or residency: Most installment loan lenders only provide credit to Canadians and people who are permanent residents of the state.
The advantages of Installment loans Canada
- They are great for emergencies. Sometimes you find yourself in a situation where you have to obtain funds immediately. It may be a broken-down car, damages on your property, or tuition for your children. It is during such times that an installment loan comes in handy. This is because it is accessible without much hustle. You can apply and get funding on the same day.
- Suitable for people with poor credit ratings. Most installment loan lenders will always consider your case even if your credit record is not great. They review the causes of poor ratings such as bankruptcy and loss of employment. They also advance loans to people with low incomes and workers in the informal sector. All you need to do is to prove that you are capable of repaying the amount you are requesting.
- Highly accessible. Most lenders allow for online applications. You only need to visit the company website and fill out the application. They will consider your case immediately and may even start the transaction before the end of the day.
- Flexible terms. The lender will consider your financial needs and sources of income. They will offer conditions that suit your situation. They even allow you to choose from among several payment options. If you are approved and repay early, they do not impose penalties.
Better than payday loans.
Unlike payday loans that have to be cleared during the next payday, installment credit is repaid over several months and may even go for a few years. You can take an installment loan that is much larger than your income, which gives you financial flexibility when planning your expenditure. Most installment credit has lower interest rates than payday loans.
- Low-interest rates. Most installment lenders charge much lower rates than banks. Furthermore, they have fixed rates meaning that you have a clear picture of what you will pay in each installment. Most lenders charge around 10% interest for creditors while banks can charge up to 13%, depending on your credit ratings. Payday lenders usually charge much higher rates. This oftentimes gets Canadians trapped in the “payday loan cycle”
Expenses that an installment credit can cover
- Utility bills. They impose a hefty financial burden because you have to clear them every month. The risks of delayed payments include disconnection and penalties for late payment. If you discover a pending bill in your mailbox when you are short of cash, you can seek emergency installment credit for a reprieve. The lenders will deposit the funds in your bank account, making it easy for you to send it to the utility company.
- Home repairs and improvements. Homes frequently need of renovations. Sometimes, a repair job such as replacing a leaking roof may be so urgent that it can’t wait. In other cases, your central heating system breaks down in the middle of winter. A small installment loan can cover such repair jobs.
- Medical expenses. The ease with which people access installment loans is what makes them suitable for medical emergencies. It might be an ankle sprain that needs chiropractic care or someone who requires physiotherapy. Installment credit is a suitable alternative for people who do not have a benefit plan.
- Car repairs Owning and maintaining a car in Canada can be expensive. The weather is downright awful during the winter months. Weather can lead to inconvenient breakdowns when you are rushing to work. If you find yourself in such a situation, you can apply for an installment to cover the repair costs. Most lenders only request for an honest valuation of the vehicle, so that the loan they advance does not exceed the value of the car. If you have a good credit record, you could get the funds within an hour, pay the repair shop, and continue with your journey.
- Travel. Vacations have a notorious habit of turning up just when you are struggling with finances. However, you can lift your spirits by securing a quick installment loan to cover the costs of travelling.
- Debt consolidation. Most installment credit providers also offer debt consolidation services. Consolidation helps you keep track of your debt obligations and clear them without incurring penalties. Lenders offer a large loan that pays off the small debts leaving enough funds to cover your other financial needs.
- Capital for investments. Sometimes investment opportunities appear out of the blue. If you are short of cash, you can prop up your offer with funds from installment credit. Most lenders will clear your loan application within a day or two, just in time to strike a deal that might change your fortunes.