Your guide to short term loans for students
Going to school and need extra cash? Find out how to get a short term loan.
Short term loans for college and university students are designed to provide extra cash to help you temporarily cover your financial commitments. Designed to be paid back within 7 to 31 days, this type of loan is typically a small amount, between $50 and $2,000. You can use the loan for any legitimate purchase, like paying for your books or rent, or to cover emergency costs like car repairs or unexpected bills.
Find out how short term loans work, what types are on offer and if they’re a suitable option for you to consider.
⚠️ Warning: be cautious with short-term loans
If you're experiencing financial hardship and would like to speak to someone for free financial counselling, you can call the Credit Counselling Canada on 1800 007 007. It is open from 8:00am to 5pm, Monday to Friday. When comparing short term loans, ensure you take into consideration any fees, charges and rates you may be charged.
Alternatives to short-term loans
Consider these alternatives before applying for a payday loan:
- Use online Government resources. The Financial Consumer Agency of Canada website demonstrates how small amount loans work – and suggests alternative options that may help you.
- Payment plans. Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan or receive an extension on your due date if you’re behind on payments.
- Contact your creditors. Speak with creditors about extending the due date of your payment, or working out a new payment plan that works for both of you. Seek personal loans elsewhere. Consider a small personal loan from a bank or a credit union. You may qualify for a loan with much lower interest rates than those offered by payday loan companies.
- Pay with credit card. Consider paying with your credit card to cover your emergency bills or payments. This is not a long term solution, as you’ll need to pay off the balance as soon as possible, but it’s an alternative to a short term loan with high – and immediate – interest rates.
Cash Money Payday Loan
- Minimum loan amount: $100
- Maximum loan amount: $1,500
- Interest Rate: Varies by Province
- Fees: Up to $17 per $100 borrowed (rounded to nearest dollar)
- Loan term: 12-14 days. Varies by Province
- Turnaround time: Within 2 hours with INTERAC e-Transfer® if approved
- Key requirements: Be 18+ years old, provide proof of recurring income
Compare short term loan options
Check the websites of any lenders you’re interested in to confirm they operate in your province of residence.
How do short term loans for students work?
Short term loans for students are designed to offer emergency funding. Most students don’t have a steady source of income and may have a problem getting approved for standard loans from traditional lenders like banks and credit unions. Short term loans, on the other hand, offer financing with more lenient lending criteria and very short approval times. This allows students to access emergency funds that they can repay on the agreed date. For many short term loans, you don’t need a good or long credit history.
There are a few different types of loans that students can look into, including:
- Payday loans. These are the most common types of short term loans. Lenders usually set repayment terms of 7 to 31 days and you can usually borrow $50 to $1,000. These types of loans come with infamously high interest rates.
- Installment loans. If you need more time to pay your loan back, consider an installment loan. Similar to a payday loan, installment loans allow you to repay your funds over a longer duration and pay it back in smaller installments.
- Auto-title loans. These are risky types of loans since you will need to put your vehicle up for collateral. However, if you have bad credit and need a longer time to pay back your loan, sometimes an auto-title loan may be a good option. Your car, motorbike, boat or RV will be used to secure a loan, meaning if you don’t make your repayments on time, your vehicle will be repossessed.
- Line of credit. You will usually need good credit in order to take out a line of credit through your bank or credit union. You only pay interest on the money you borrow, which means you can use the line of credit only when you need it and pay it back as soon as you can.
How much will the loan cost?
The cost of your loan will depend on the province you reside in and the lender you choose. Additionally, your income, credit score and the amount you borrow may play a role.
Some lenders will offer more competitive rates than others, however many lenders tend to charge the maximum they can, which is regulated at a provincial level in many provinces.
Additional costs that you may face include:
- Administrative fees in order to initiate and disburse the loan
- Late fees if you aren’t able to make your repayments on time
- Early repayment fees if you want to pay back your loan early
- Other penalties and fees that are set by the lender
Make sure you review the terms and conditions of the loan carefully before you accept and sign the loan contract.
Are students eligible for short term loans?
To be eligible for a short term loan, you will usually need to meet the following requirements:
- Be 18 years of age, or the age of majority in your province or territory.
- Be a Canadian citizen or a permanent resident with a valid Canadian address.
- Have a working bank account (if applying online).
- Have proof of an income in order to prove that you can pay your loan back.
While you may not have a full-time job as a student, the following generally qualify as “income”:
- If you’re a full-time or part-time employee
- If you receive welfare or government benefits
- If you have investment income
You may have to submit 90 days worth of banking statements in order to prove that you will be able to repay your loan.
Factors to consider when comparing your loan options
When deciding on the specific loan that you should take out in order to help with your student finances, consider the following factors:
- Loan term.
Short term loans will usually have to be paid back within 7 to 31 days, however terms can extend up to 1 year depending on how much money you borrow. When choosing a short term loan, consider when you’re likely to get your next paycheque so that you can match your repayments to that schedule and avoid late payment penalties. Factor in the amount you borrow and realistically budget your repayments with your typical monthly income and expenses.
- Approval time.
The whole point of applying for a short term loan is to avoid waiting around for approval and to get access to your cash within a few hours or by the next business day. It’s important to compare your options and choose a lender with a fast and easy online application process. This gives you the chance to apply and get approved for a loan within a few minutes, with no paperwork or in-person meetings required. Make sure you meet the eligibility requirements before applying for a loan.
- Interest rates.
Compare the interest rates on different loans to ensure you avoid paying excessive fees, especially since some lenders like to stay competitive and charge lower rates. Payday loan rates are regulated in most provinces, so make sure the lender abides by any laws that are in place. Short term loans usually have excruciatingly high interest rates, so be extra careful when choosing one and take time to compare your options.
- Late payment fees.
While shopping around for a short term loan, be sure to read the fine print to avoid being caught off guard with extra expenses like crippling late fees. Borrow only as much as you need and be sure that you can manage your repayments to avoid falling into a vicious cycle of debt. If you don’t think you can repay your loan on time, you should probably re-consider taking out the loan in the first place and look into other options to get financing.
- The application process.
You should consider a lender with a good reputation, a simplified online application process and a quick approval timeframe. Some lenders even offer same-day loans, so that you can get your money the same day you apply.
Emergency student loans
Before taking out a short term loan from an outside lender, you may want to contact the office that deals with financial aid at your college or university. If you’re experiencing a financial hardship that requires emergency cash, some schools offer low or no-interest short term loans for small amounts. These loans will typically need to start being repaid within 30 to 90 days, but as always, terms and conditions will vary between schools. If your school doesn’t offer this service, you can look into programs that offer similar financial help with a focus on students.
What are the risks of getting a short term loan?
- If you can’t make your repayments on time. If you struggle to make your repayments on time, you’ll likely be charged late fees, which will ultimately increase the cost of your loan. This can throw you into a spiral of debt if you can’t manage your repayments.
- Excruciatingly high fees. Short term loans, although convenient and fast ways to get your hands on money, are known for their astronomically high interest rates and fees. Be sure that you can pay back your loan in full, including the fees, before you take one out.
- Negative impact on your credit score. If you don’t make your repayments on time, a lender may report you to the credit bureau, which means your credit score will take a negative hit. Not all lenders will report you for late payments – this is at the discretion of the lender.
Payday loans are available in all provinces and territories across Canada. You should be aware that payday loans are regulated by individual provinces, which means costs and fees can vary. Ensure that any lender you choose abides by the laws of the place you live.
At the time of writing in January 2019, the Yukon, Nunavut and the Northwest Territories do not have legislation regulating payday loans at the territorial level. Payday loans are regulated in these territories at the federal level only.