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Online installment loans in Canada
Installment loans give you quick access to amounts up to $10,000 or more with longer repayment terms.
Installment loans are designed to cover one-time expenses that need a quick fix. When you apply for an installment loan online, you can typically get money fast. You’ll usually have a longer time to repay the loan than you would have with a payday loan.
Read on to find out how installment loans work, what you can use a loan for, the benefits and risks, and factors to consider when comparing loans. We also provide a list of other options you can consider if you don’t want to use an installment loan.
Compare online installment loans
What's in this guide?
- Compare online installment loans
- What is an installment loan?
- How much will my loan cost me?
- What are the benefits of getting an installment loan?
- Am I eligible?
- 6 tips for finding the right installment loan in Canada
- Is an online installment loan right for me?
- How long does an installment loan appear on my credit report?
- What factors affect my credit score?
- Paying off an installment loan
- What are my other options?
What is an installment loan?
An installment loan is technically any loan that comes in a fixed amount, which you then repay plus interest and fees in regular repayments. Payments are usually made once a month, however some lenders will allow you to pay bi-weekly or weekly. Personal loans, student loans and car loans are all technically installment loans. However, most loans that lenders refer to as installment loans are a type of short-term loan, similar to a payday loan.
Installment loans come in much larger amounts and longer repayment terms than payday loans do, although they’re generally smaller than your average personal loan. Installment loans also come with higher interest rates than regular personal loans. You can typically borrow up to $10,000 or more and take 6 months to 5 years to pay it off, depending on the terms.
Much like payday loans, some installment loans are designed to attract borrowers who have bad credit scores. This is because they tend to be less heavily regulated than payday loans. Be careful that the installment loan you are interested in does not attract highly unfavourable terms.
What can I use an installment loan for?
You can generally use an online installment loan for any legitimate purpose. However, it might be best to save them for emergencies, since they can come with higher interest rates than other types of personal financing. You can use installment loans for:
- Medical expenses. Sometimes healthcare providers don’t provide financing that all patients can qualify for. An installment loan can help make paying off medical bills more manageable, although more expensive.
- Building or car repairs. Got a car that needs urgent repairs? Installment loans can help you cover that cost, no mater what your credit type is.
- Overdue utility bills. An installment loan can help you keep the lights on, water running and phone line working when you don’t have the funds to make your utility payments on time.
- Building your credit. Taking out an installment loan can sometimes help you rebuild your credit if you make payments on time. If this is your primary goal, however, you might want to consider applying for a credit building loan at a local financial institution like a bank or credit union. These which typically comes with lower interest rates and have low credit requirements.
How much will my loan cost me?
This will depend on the loan and the lender. When you apply for a loan and are approved, you should receive a loan contract that will outline the fees and interest rate that will apply to your loan.
Here are the costs that may apply:
- Fees. You may be charged a one-time fee for borrowing the loan as well as any early repayment penalties and late repayment fees.
- Interest. This is the rate of interest you are charged for borrowing, expressed as a percentage.
- Annual percentage rate (APR). This includes all fees and interest expressed as a yearly percentage.
Use our monthly payment calculator below to see how much you’ll pay in both the short and long run:
Installment loan repayment calculatorSee how much you'll pay
|Loan terms (in years)|
What are the benefits of getting an installment loan?
Online installment loans come with various features. Here’s what you should know if you’re considering applying for one:
- Convenient application process. You can conveniently apply for a loan online, which usually only takes a few minutes. Some lenders even have smartphone apps that you can use to apply for loans.
- Quick funding. You can learn your application status in minutes with most lenders, and if approved, you can accept the loan contract immediately. Once you do this, you can expect the money in your bank account as early as the next business day.
- Flexible eligibility criteria. Getting online installment loans with bad credit is possible, primarily because lending requirements are slightly more relaxed. “No credit check” online installment loans generally don’t make hard inquiries on your credit score, but you’ll need to demonstrate how you’ll be able to repay the loan back.
- Variable fees. The amount of money you borrow, the provider you choose and the province you reside in will likely have an effect on how much you will pay in fees.
- Loan amount and terms. Both of these factors will likely depend on local laws, since loans are provincially/territorially regulated. Maximum loan amounts and terms of length will also likely depend on both the provider and those government laws.
Watch out for predatory lenders
Installment loans are not just for people with bad credit, although you wouldn’t know that if you only did a quick Google search. That’s because some subprime lenders repackage what they would have previously called a payday loan as an “installment loan” in an attempt to appear less risky.
Much like payday loans, installment loans tend to come with extremely high interest rates and have similar features that can act as debt traps. You can usually avoid them if you know what to look out for:
- Loan renewal options. Does your lender allow you to renew or “rollover” your loan if you can’t pay it off in time? You might want to look somewhere else, because this is how you can fall into a vicious cycle of debt.
- Guaranteed approval. Lenders that guarantee you can get a loan through them before you apply are not looking out for your best interests. Most reputable lenders want to make sure you can pay off your loan first before telling you that you’ve been approved.
- Upfront fees or payments. Reputable lenders that charge application or origination fees don’t ask for payment until after your have received your loan. Anything else could be a scam.
- Pressure to borrow more money than you need. Borrowing more money than you need means that you’ll be liable to pay more interest. A lender that pressures you to take out more money than you actually need doesn’t have your best interests in mind.
- Insurance add-ons. Some lenders push insurance options that sound like they protect you, but really protect them in the event that something happens to you that affects your loan repayment (like death or other accidents). Lenders typically don’t include this in their APR – even though it’s technically a fee – and use it as a way to get around regulations on how much they can charge.
- The lender approached you. If you receive texts, email or calls, it could be a scam. At most, legitimate lenders might send you a letter or two in the mail. Run away if you feel as though they’re pressuring you into taking out a loan you don’t really need.
What if I’m the victim of a predatory lender?
Under federal law it’s illegal for lenders and collection agencies to repeatedly contact borrowers outside of work hours, threaten them with jail time or garnish their wages without a court order. If you believe you might be a victim of a predatory lender — even a tribal lender — you can file a complaint with the Office of Consumer Affairs in your province or territory.
Am I eligible?
Installment loans can be applied for if you have bad credit or are on a lower income, as long as you are able to afford the repayments. Generally, lenders will look at your income, credit history and employment information to determine your eligibility for a loan. Unlike a payday loan, your credit history does tend to matter more.
Additionally, you will need to meet the following basic eligibility criteria:
- Proof of income. This doesn’t mean you need to be employed full time, but you may need some sort of income, whether it is disability, welfare, a pension or a part-time job.
- Active bank account. If you don’t have a bank account, you can sometimes get a cash installment loan from a physical branch location.
- Valid government-issued ID. Lenders might ask to see your driver’s license to verify that you meet the age requirements. You will typically need to be the age of majority in your province or territory, which is normally 18 or 19 years of age.
- Canadian citizen or permanent resident. You’ll typically need to be a Canadian citizen or a permanent resident to apply for a loan.
Applicants with good to excellent credit scores are more likely to get a good deal on online installment loans. That’s because many lenders use underwriting software that rely heavily on your credit history when determining your eligibility.
6 tips for finding the right installment loan in Canada
- Figure out what you care about most. Is speed most important to you? You might want to look at online lenders. Do you care more about overall cost? You might want to check your local bank or credit union. Know what you need out of a loan can help you speed up your search by giving you something to go by.
- Ask yourself: does a credit card make more sense? Credit cards typically have higher interest rates than personal loans, but that’s not always the case with online installment loans. There’s a chance you could get funding at less cost (or risk) by slapping that expense on plastic, if it isn’t over your credit limit.
- Pay attention to the APR, not just the interest. A loan’s APR takes into account both interest rates and fees, giving you a better idea of the true cost of the loan.
- Search for personal loans too. As we mentioned before, lenders that use the term “installment loan” can be predatory. You might have better luck finding a legit lender if you also look for personal loans.
- Compare lenders. You might not be getting the best deal if you don’t look at multiple lenders. You can start by using our comparison table.
- Don’t be tricked by long terms. Some installment loan providers offer high-interest loans with long terms. While this might reduce your monthly payments significantly, you could end up paying double the amount your borrowed — or even more — if you take the entire time to pay it off.
What to look for when comparing loans
- Loan amounts. Will you be able to take out exactly how much you need? Try to avoid unnecessarily large loans that can lead to extra debt and throw you into the vicious cycle of borrowing.
- Interest rates. Be skeptical of lenders that won’t give you an interest rate upfront. Try to get an estimate of your APR – your combined interest and fees – before you apply.
- Fees. Check to see whether you have to pay a fee to apply for the loan. You should also consider any additional fees you may have to pay, such as late payments.
- Loan terms. Your loan term will determine how long you will have to repay it. It’ll also determine how much you pay in interest. A longer-term loan might seem more manageable, but it could end up being a lot more expensive since you will pay more in interest. Try going with the shortest loan term you can afford. The faster you pay back your loan, the more money you will save in interest payments.
- Speed. Will you be able to get your funds by the time you need them? Fast loans can sometimes be more expensive, but low interest and fees aren’t much help if you need cash right away.
Is an online installment loan right for me?
You may want to consider an installment loan for the following reasons:
- Fast turnaround time. Providers of online installment loans tend to process your application very quickly, sometimes in minutes. If you accept the loan contract, you can get your money as soon as the following business day.
- Bad credit applicants are accepted. Conventional loans normally come with stringent lending criteria, but most employed people can consider applying for online installment loans with bad credit, as long as they can show their ability to repay the loan.
- More manageable repayments structure. Unlike payday loans or cash advance loans that you have to repay by your next payday, you can take longer to repay your installment loan. Most lenders even give you the ability to choose between making payments once or twice a month.
You may want to consider other options if you’re concerned about:
- Fees. Online installment loans in Canada normally charge higher fees especially in comparison with more conventional forms of credit.
- Higher repayments due to higher loan amounts. Installment loans have higher loan amounts than standard payday loans. While you have lower ongoing repayments because you’re paying it back over time, repayments can still be expensive. Make sure it’s manageable on your budget before you sign up.
- Total loan cost. The APR on online installment loans can still be quite high, resulting in a high total overall repayment.
How long does an installment loan appear on my credit report?
The answer to this question will depend on your ability to repay your installment loan when it’s due. Consider the following scenarios:
- Applying for an installment loan. Any inquiries made by creditors will remain on your file for a minimum of 3 years.
- If you had an installment loan and it’s been paid in full on time. The account will remain on your file for 6 years.
- If you currently have an installment loan and have made late payments. Again, late payment history will generally remain on your file for 6 years.
- If you had an installment loan that went to a collection agency or you declared bankruptcy. Both of these scenarios will remain on your file for 6 years.
What factors affect my credit score?
The two main credit bureaus in Canada – Equifax and TransUnion – use different algorithms to calculate your credit score. Not only does this mean your credit score will differ slightly depending on which bureau you check, it also means that each bureau weighs factors differently to calculate your credit score. Here are the five main factors that make up your credit score:
- Payment history. Your payment history demonstrates how you have repaid the credit that you’ve borrowed – whether that’s on time and in full, late, in partial payments, etc. Lenders will also report the number and type of credit accounts that you have. Having a variety of different types of credit accounts can be helpful – such as credit cards, loans, mortgages, etc. Your payment history makes up around 35% of your credit score.
- Credit utilization ratio. This is the amount of credit you’re using compared to the total amount of credit available to you. Running your balances up to your credit limit, or even over 40% of your available credit limit, can negatively affect your score. Try to keep your credit utilization ratio around 30% or less. Your credit utilization ratio makes up around 30% of your credit score.
- Credit history. This is the length of time that you’ve had your accounts open for, and can affect your credit score for better or for worse. The longer you have accounts open, such as credit cards or lines of credit, the more positively your credit score will be impacted. Your credit history makes up around 15% of your credit score.
- Public records. Declaring bankruptcy or having a collections agency come after you will damage your score. Public records make up around 10% of your credit score.
- Recent inquiries. Applying for new credit means a lender will likely conduct a hard pull on your credit report to determine whether or not you’re a good candidate for borrowing money. But doing a hard pull means your credit score will take a temporary dip. A few recent inquiries on your credit report can raise red flags with lenders since it looks like you’re trying desperately to access a lot of credit at one time. Inquiries make up around 10% of your credit score.
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How does an installment loan affect my credit score?
Taking the above factors into consideration, applying for and receiving an installment loan will likely affect your credit score in the ways listed below. Take note that some positively affect your credit score, while others may negatively affect it.
- Inquiring about a loan or taking on new credit. Applying for a form of credit, whether it’s a credit card, a line of credit or a loan, means that your score will take a slight negative hit. If you apply for an installment loan, even if you aren’t approved, it will likely be listed on your credit score. In addition, any new loan can stay on your file for a minimum of 3 years.
- How long your credit history is. The length of your credit history makes up a part of your credit score. Since installment loans are usually for longer terms, around 6 months to five years, they can have a potentially good impact on this component of your credit score.
- Payments made to your installment loan. Your payment history makes up a major part of your credit score. If you don’t make your repayments on time, your credit score will be negatively affected. If you fail to make repayments and your loan goes into default, your score will take a bigger hit. If you make your repayments on time, your score will be positively impacted.
- Variety of loans. Since you’re applying for an installment loan, this could be viewed positively on your credit history if you have a mix of other credit forms that are financially under control. However, if you have a lot of accounts open, this will be viewed negatively and your score will take a negative hit.
- Keeping your balance-to-limit ratio in check. Since an installment loan only allows you to borrow a certain amount of money and make the repayments in installments throughout the set time period, you’ll be able to keep your balance-to-limit ratio in check.
Paying off an installment loan
How you repay your installment loan will largely depend on the lender. Generally, you need to make monthly, semi-monthly or weekly repayments until your loan is completely paid off.
If your lender allows you to repay your loan ahead of time without charging a prepayment penalty, you could stand to save on interest. That is, as long as your loan repayments all go toward paying off interest and the amount you borrow.
It’s not uncommon for installment loan providers to charge interest-only repayments in the beginning, meaning that you can’t save on interest by paying it off early. Understand the terms and conditions of your loan before you apply for and accept it.
How do repayments work on an installment loan?
Repayment terms will differ depending on what type of loan you apply for and the lender you apply with. Generally, the following will apply:
|Loan terms.||These vary between 6 months and 5 years.|
|Payment method.||Lenders will usually automatically deduct payments from your bank account on the day the payments are due. Some lenders will also give you options of repaying the loan online, via a cheque or through an app.|
|Repayment frequency.||You will usually repay the loan according to your pay schedule from work. If you get paid weekly, bi-weekly or monthly, you can arrange your repayments around this schedule.|
What are my other options?
Most online installment loans are unsecured, meaning they don’t require collateral, such as your car or house. It sounds great at first, right? You don’t have to put anything on the line. However, unsecured installment loans that come with high interest rates can actually pose more of a risk to your financial health: You can end up in a vicious cycle of debt if you have trouble paying the loan off. If you want to look at other types of loans, here are some alternatives you can choose from:
- Secured personal loan. If you have trouble getting approved for a personal loan, you can consider getting a secured loan. A secured loan means you have to use some collateral to back your loan, such as your car or house, which is used as leverage to make sure you pay back your loan. You’ll have a better chance at getting approved and getting a good deal on interest rates than you would with an unsecured loan.
- Home equity loan. A home equity loan is a special type of secured loan that uses the amount of equity you own in your home as collateral.
- Credit union loans. Credit unions and other non-profit financial institutions typically offer lower rates than other lenders, even to people without good credit. You can typically get even lower rates by securing your loan with a chequings or savings account that you hold with them.
- Crowdfunding. If you don’t need those funds immediately, it might be worth it to reach out to your social network and start a crowdfunding campaign. You won’t have to pay it back, though many platforms charge a fee based on how much money you raise.
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