Need a loan to cover a pressing expense? There are plenty of borrowing options available to you in Vancouver, including installment loans.
Having funds made available to you when your bank account isn’t quite as full as you’d like can help with any number of life’s financial predicaments. This is when an installment loan can become a priceless tool.
What is an Installment Loan?
An installment loan is basically any type of loan that is repaid in installments. You will be given a specific loan term, which is the time frame within which you will be obligated to repay the loan in full. During that time, you will have to make installment payments towards the loan amount until the entire balance is paid off in full.
The actual installment schedule can vary. For instance, you can make monthly, bi-weekly, or even weekly payments. The schedule you choose will come down to both your preferences and what your lender offers. Many times lenders will only provide one option, so your choice will be limited to that.
Take a look at this infographic to learn all about the true cost of borrowing.
What Credit Score Do You Need to Get Approved For an Installment Loan?
The exact credit score that would be required to secure an installment loan will depend on the loan amount you need and your lender. Larger loan amounts will usually require a slightly higher credit score as the risk factor is higher. Different lenders might also have their own specific criteria about the credit scores they require before extending an installment loan in Vancouver.
Furthermore, an unsecured installment loan may also warrant a higher credit score because there is no collateral to back up the loan. Unsecured loans are usually riskier for lenders because they have no valuable asset to recoup if the borrower defaults on the loan.
Having said all that, installment loans from conventional lenders typically require a minimum credit score of 650. Any lower than that will most likely result in a rejected loan application. Further, a lower score will also mean a higher interest rate if the loan application is actually approved.
Can You Get an Installment Loan When You Have Bad Credit?
The short answer to this question is yes. It is possible to get an installment loan if you have bad credit, but it will be more difficult to do so. Lenders typically prefer to deal with borrowers who have good credit because they pose less of a risk of defaulting on their loans. As such, bad credit borrowers are usually turned down for loans from conventional lenders.
That’s where alternative lenders come into the picture. There are lenders available to deal specifically with bad credit borrowers who would otherwise have a tough time getting approved for a loan from a traditional lender.
These lenders don’t place any weight on credit scores (click here for more information about credit scores), and instead look at other factors in order to determine whether or not to approve a person for an installment loan, including the following:
- Income – You’ll have a better chance of getting approved for a loan with bad credit if you can show that you make enough money to support the payments.
- Debt – The amount of debt you carry matters. Lenders will calculate your debt-to-income ratio when deciding whether or not to approve your loan application. This ratio tells lenders how much of your income is dedicated to paying off your current debt. A low debt-to-income ratio will make you more likely to get approved, while a high ratio will do the opposite.
- Assets – If you have any valuable assets that you can use as collateral to back up your loan, the lender will also take this into consideration.
What’s the Difference Between a Payday Loan and Installment Loan?
There are significant differences between a payday loan and an installment loan, including the following:
Interest rate. Payday loans come with extremely high-interest rates that can be as high as 500% in many cases. Installment loan interest rates are usually much lower than this, particularly if you have a very good credit score.
Term. Payday loans come with very short repayment terms. The loan amount (plus interest) will need to be paid back within two weeks, or when the next paycheck comes in. Installment loans can come with terms that are varied, from short to long terms. That said, the repayment terms are much longer than two weeks and are usually anywhere from one to three years.
Payments. While installment loans allow borrowers to repay their loans in installments, payday loans need to be repaid in one lump sum.
Interested in more information about payday loans? Click here.
Installment Loan For Debt Consolidation
If you have high-interest debt – such as credit card debt – as well as many other debt payments, you may be able to simplify things by consolidating your debt.
Debt consolidation works by taking out one loan to pay off all other debt that you may have. This can not only make things much easier to manage, but it can also help you save money if you are able to secure a loan at a much lower interest rate compared to the debt you currently have.
You’ll need to apply for a debt consolidation loan, and in order to qualify, you’ll typically require good credit. You’ll also need to show that your total debt does not exceed anymore than 50% of your income and that you have enough cash flow to consistently cover the payments toward your new debt consolidation loan.
What Can You Use an Installment Loan For?
There are seemingly endless ways you can use the money from an installment loan, though some expenditures may not necessarily be recommended. At Loans Canada, we recommend an installment loan for any one of the following:
- As an alternative to a payday loan
- To cover the cost of an emergency
- To make a large purchase that you need time to pay off in full
- To cover the cost of unexpected travel expenses
- To rebuild your credit
For instance, perhaps your car has been involved in an accident and needs immediate repair, or maybe you want to improve your home and require a lump sum of money to pay for the project. Or maybe a loved one overseas has fallen ill and you need to cover the cost of airfare to make a last minute visit. These are all valid reasons to take out an installment loan in Vancouver.
Get the Installment Loan You Need Today
If you’ve carefully reviewed your finances and have determined that an installment loan is the right choice for you, call Loans Canada to help you find the right lender and loan product that best suits your needs.