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Life comes with all sorts of recurring expenses that can be tough to handle without the right financial tools. However, getting an installment loan in Charlottetown can be a great way of covering your expenses, especially when you’re trying to avoid using up your savings or taking on too much credit card debt.
What Are the Recommended Uses For an Installment Loan?
When you’re approved for an installment loan in Charlottetown, you’ll receive a predetermined amount of cash, deposited directly into your bank account shortly after the appropriate paperwork has been processed. You’ll then pay your loan back through equally divided installments over a schedule that you and your lender will have agreed upon prior. This plan may last several months to several years depending on your financial requirements.
Read this before you apply for any loan.
Unlike say, a mortgage or a car loan, the funds from an installment loan aren’t meant for any specific purpose. Therefore, you can use your newly acquired cash for almost any expense that comes your way. That being said, since an installment loan will put you in debt for some time, it’s best that you use your loan money responsibly, only investing it in things that are necessary, rather than on clothes or other consumer goods.
We recommend an installment loan for expenses such as:
- Renovations, home maintenance, or other house-related costs
- To avoid payday loans or other predatory financial products
- Credit improvement (by paying your installments on time and in full)
- Medications or elective surgeries that aren’t covered by health insurance
- Transportation and travel expenditures
- Consolidating any outstanding debts
- Car accidents, financial emergencies, and other unexpected expenses
Why Should Payday Loans Be Avoided?
As we mentioned, installment loans are a good tool if you’re actively trying to avoid predatory financial products in Charlottetown, most notably payday loans, which have been and continue to be dangerous for unsuspecting borrowers across Canada.
Searching for debt relief from predatory loans? Look here.
Remember, a traditional installment loan in Charlottetown involves a negotiable payment term with installment amounts that adhere to your financial needs. On the other hand, a payday loan can be extremely hazardous to your finances because:
- Payment terms are far shorter and contact conditions are non-negotiable
- Penalty fees apply if full payment isn’t met exactly 2 weeks following approval
- Interest rates are far higher than installment loans (up to 25% throughout P.E.I.)
- Many online payday loan sources are actually scams
- Rollovers, which are illegal in many other provinces, are permitted in P.E.I.
- Any of these problems can lead to a severe and unending cycle of debt
Note: a “rollover” is when the lender allows a borrower to apply for a second payday loan before the full balance of their original loan is paid. This is one of the most common causes of the unending debt cycle, where borrowers get trapped and must continually rely on payday loans just to get by. It’s important to avoid this cycle at all costs!
Check out this infographic about the dangers of the payday loan cycle.- Same-day loan approval and deposit is common practice
- This can be helpful when you have an immediate financial emergency
- Only proof of a chequing account, Charlottetown address, and employment are required for approval.
- No credit check is required. Those with bad credit will also have no problem getting approved.
Will Bad Credit Get Me Rejected for an Installment Loan?
While payday loans can be a simple solution when you have bad credit, as we said, they can be extremely dangerous and may not be worth the risk. Don’t worry, you can still get approved for an installment loan as a bad credit borrower in Charlottetown.
The Application Process
Generally, the application process for an installment loan in Charlottetown is more or less the same for every would-be borrower. Before they can approve you, your potential lender needs to determine how trustworthy you’ll be with the funds they would grant you. Therefore, they’ll be examining some of your personal and financial elements, such as your:
- Debt-to-income ratio
- Employment record (past and present)
- Gross monthly and yearly income
- Credit report and credit score
- Recent bank statements
- Payment history
- Financial delinquencies, if any (consumer proposal, bankruptcy, etc.)
How Bad Credit Can Hinder Your Approval Chances
Despite the fact that every lender’s approval process is slightly different, one thing is for sure. Bad credit, meaning you have a credit score of 300-560, may signal to them that you’ve had trouble keeping up with the payments from your previous credit products. Since they could lose money by lending to a borrower with a heightened risk of the same behaviour, your approval chances will diminish the worse your credit is, especially with a bank or other prime lender, where borrowing conditions are more strict. In addition, the interest rate that your lender adds to each payment will end up being higher and less affordable, because of the extra risk they’re taking.
Conditions for Bad Credit Approval
As we said, however, installment loan approval may not be totally out of reach, given certain circumstances. The process will just require a bit more attention and effort on your part. So, even if you have bad credit, you can still receive approval if you:
- Apply with an alternative or private lender
- Apply with a lender who deals specifically with bad credit clients
- Request a loan amount that your income is proven to support
- Offer up collateral (valuable property) as security for the loan
- Ask a cosigner to strengthen your application using their own financial aptitude
- Can prove that you’ll also be able to afford the associated higher interest rates
If you have bad credit, you can also try applying for a guarantor loan.
The Resulting Effect on Your Credit
Even if applying for an installment loan with bad credit might be a bit more difficult and expensive, the result may actually end up benefiting you in more ways than one. Not only will you be able to afford many of the expenses listed above, but you’ll actively be improving your credit every time you make a responsible payment, meaning you meet your proper payment date and amount.
Read this to discover some more ways to improve your credit score.
Once you’ve elevated your credit score back up to the good range (660-900) and you’ve paid off your bad credit loan in full, you should be financially healthy enough to get approved for a traditional installment loan with more favorable rates. Your hard work will be worth it in the long run!
Do you know what the true cost of borrowing is? Find out here.What Payment Plans Will Be Available?
Again, every source of installment loans in Charlottetown is going to have a slightly different approach to the lending process, including the type of payment plans they offer. So, before you apply, it’s best to ask your potential lender about this factor, as the frequency with which you make your installments may greatly affect your finances. Consider each payment type and whether or not your income would support it.
Generally speaking, lenders may offer the following payment frequencies:
- Monthly – 1 payment per month = 12 payments per year
- Weekly – 1 payment per week = 52 payments per year
- Bi-weekly – 1 payment per 2 weeks = 26 payments per year
For instance, many borrowers will choose monthly payments, as it’s often more plausible for the average income. Nonetheless, the payment frequency you choose should depend on your own financial preferences, as well as the other expenses you regularly have to deal with. In order to avoid any potential debt problems in the future, make sure you only apply for a loan amount that you can reasonably afford!
Trying to find an online loan with affordable monthly payments? Check this out.
The Best Installment Loans in Charlottetown
If you’ve been looking for an installment loan that suits your financial lifestyle, Loans Canada is the right source for you. We can set you up with the best lenders in Charlottetown or anywhere else on Prince Edward Island. Apply with us today!
