Best installment loans in Canada
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Even with the best-laid plans, personal emergencies can strike at the most inopportune times, causing a huge strain on your financial budget. If you don’t have money on hand to deal with problems such as home repairs, promptly, they can lead to even higher costs down the road.
It’s in these types of situations that installment loans can provide a helping hand.
What is an installment loan and how does it work?
An installment loan is a loan that is repaid with a fixed payment system, also known as installments, over a period that’s typically much longer (and with lower interest) than payday loans. With the fixed payment system, borrowers know just how much money they will owe their lenders each month.
Installment loans can also serve as a strong alternative to credit cards if the interest rate is lower or if you’re carrying a large balance month-to-month and find it difficult to keep on top of minimum payments. Some people even turn to installment loans as a form of debt consolidation.
Installment loans can also be used to cover the costs of:
- Personal emergencies: health or dental procedures, home or car repairs, or overdue utility bills.
- Important milestones: marriage, welcoming a newborn, or supporting a child in post-secondary school.
- Personal benefits: taking a vacation or making an expensive purchase.
What are the best installment loans?
If you’re interested in borrowing an installment loan, you’ll want to compare some of the best lenders in Canada. Here are some options to choose from:
Loan amount: $500 to $50,000
Rates: 1.99%-46.96% APR
Loan term: 3 to 60 months
Loans Canada a loan search platform that welcomes loan applicants regardless of their financial history or credit score. The lender does the researching leg work for you, by providing multiple loan options to choose from based on your application.
Click here to apply or learn more by reading our complete Loans Canada review.
Loan amount: $500 to $50,000
Loan term: 3 to 120 months
LoanConnect is a search engine for unsecured installment loans and lets you compare lenders to find the best rates possible. All lenders are verified and vetted, and typically offer fast turnarounds for loans.
Click here to apply or learn more by reading our complete LoanConnect review.
Loan amount: $300 to $35,000
Loan term: 6 to 60 months
Mogo lets borrowers “test drive” their loan for 100 days, which means that if you start experiencing buyer’s remorse you can return the loan as long as you pay back the principal. Not many lenders give consumers that much time to return the loan. Borrowers can also use MogoApp, which gives strategies and tips on how to improve your financial habits.
Mogo lends to borrowers with a wide ranger of credit scores, but those with excellent credit who qualify for an interest rate on the lower end of the 9.9%-46.96% range will be referred to Lendful, Mogo’s partner lender.
Click here to apply with Mogo
How do I choose the right lender?
These days there is no shortage of Canadian online lenders, so you have your pick of options available. Make sure to do your due diligence by researching various installment loans available instead of just jumping on the first loan you set your sights on. Some people turn to online installment loans because they’re looking to borrow money as quickly as possible; and as a result, they risk overlooking key details that might have serious consequences later.
Here are some tips for finding the right lender:
- Look at the APR instead of just the interest rate: An APR, which stands for Annual Percentage Rate, is the interest you’re charged over 12 months, plus extra fees, sometimes known as finance charges. The APR is a much more thorough cost assessment than a listed interest rate, so you want to try and find a low APR.
- The time it takes to get the loan: Research how quickly you can receive a loan before applying. If you’re in a bind, make sure that the loan arrives fast enough for you to cover all your expenses, especially in an emergency. But be careful—sometimes loans you can obtain quickly have higher interest rates and fees that others don’t.
- Consider the loan terms: Long loan repayment terms can be appealing because it means you can take your time repaying the loan. However, taking advantage of these longer repayment plans could leave you paying much more than you intended, sometimes at least double what you borrowed, once interest rates are considered. Instead of opting for the loan with the longest term period possible, calculate how rapidly you can repay your loan and choose the shortest term possible.
Use the loan payoff calculator
How do I apply?
Research which lender is right for you.
Complete an online application form, which should take you 5 minutes (or less).
Wait for approval and get your money! Lenders typically pride themselves on fast turnaround times, so you may even receive the loan itself within 24 hours.
Lenders do vary in the credentials that they require from applicants. For instance, some lenders may want a decent credit score, while others ask you to provide a guarantor. In general, lenders often ask for proof of income, an active bank account, government-issued identification, and proof that you’re a Canadian citizen or permanent resident. The minimum age requirement to obtain a loan is 18 years of age, so the identification documentation you provide will need to include a date of birth.
Is it worth it?
- Installment loans have a fixed interest rate, so even if the market changes, your interest rate will remain the same.
- If you’re in an emergency and need money ASAP, the application process is quick and easy. Often, you’ll find out if you qualify on the same day of the application and receive the money within one business day.
- Borrowers often receive huge sums of money, which can cause financial strain if you’re not earning enough to easily repay the debt.
- If your circumstances change and you need to borrow more money, it’s not as simple as asking for more credit, like you could with a credit card. Installment loans are typically for a set amount of money, to which you cannot add at a later time.
Who is an installment loan good for?
Installment loans can be a good option for Canadians looking to borrow a large sum of money within short order, regardless of their credit score. These types of loans are beneficial because if payments are made on time, the borrower can eventually improve their credit score.
Installment loans are also useful for those stuck in a payday loan trap. Sometimes people rely on payday loans, also known as cash advance loans, but once they pay them back (with very high interest) they’re out of money and likely in need of another loan. Since installment loans have longer repayment terms and less interest, they might be a good solution for people looking to escape this cycle.
Who should stay away?
If you don’t have a steady income or a guaranteed way of paying back the loan, it’s best not to apply for one.
What are the differences between an installment loan and a personal loan?
Installment loans are essentially a type of personal loan, and both are similar in that they’re often used by borrowers looking for additional funds to cover medical bills, repairs or renovations, big purchases, etc. While installment loans are offered at a fixed rate, personal loans come with either fixed or variable interest rates. And interest rates may go up, requiring you to pay more money, or go down, letting you pay your loan’s principal off faster.
Installment loans often come at a higher interest rate than personal loans, but they’re typically easier to acquire. With installment loans, there is more flexibility regarding the applicant’s credit score. Even with a bad score, you can still apply for an installment loan—you just might need to provide a guarantor or proof of income.
Our bottom line
While installment loans may be easy to access, people need to ensure they borrow responsibly before committing. It can be tempting to borrow a large sum of money to take that dream vacation, but make sure not to bite off more than you can chew—and if you only need a small amount, it may even be worth considering certain personal loans. As long as you have a reliable income and trust that you can adhere to a payment plan, installment loans might just be the solution for you; especially if you are able to obtain a lower interest rate or are trying to dig your way out of a bad credit score. Not only can installment loans help you build that credit back up, but they also help you better manage certain financial situations.
Can I pay off my installment loan quicker than the specified term length?+
Yes, you can put more money than required onto your monthly repayments or even pay down your installment loan all at once without receiving any sort of penalty.
Can I have two installment loans?+
Sometimes bad things happen all at once. For instance, your car may break down and a few months later, your roof collapses. While it’s certainly not ideal to take a second installment loan while you’re still paying off your first one, it’s sometimes possible if you’ve proved to your lender that you’re capable of making repayments on time and have already paid a significant part down. However, you may not get the best interest rate, and it’s important to ensure that you’re not taking on more debt than you can handle.
Can I get an installment loan if I have bad credit?+
Yes, even if you haven’t yet built up good credit, you can still obtain an installment loan, particularly no-credit-check installment loans. But be wary, loans that can be acquired without a credit check, typically have higher rates and fees.