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If you’re struggling to keep up with your bills and have no emergency savings to fall back on, you may be considering taking out a loan. A loan can help cover your bills and spread out the payments so they’re more affordable. If you have poor credit or a low income, you may be considering a payday loan, however, a small installment loan is the better way of covering your financial debt.
An installment loan can do everything a payday loan can do but better. It is not only cheaper, but it can also provide a longer repayment period making payments more affordable. Installment loans are also much larger which means you can cover a bigger expense. For example, an installment loan can help you:
It’s important to understand that there is a difference between a payday loan and an installment loan. Do not get the two confused. Yes, they both are loans and must be paid back. However, there are key differences in interest, repayment term and loan amount.
When trying to decide between a payday loan and an installment loan there are multiple benefits and drawbacks to consider.
There are a number of factors that can affect the cost of a payday loan and installment loan. This may include the interest rate, term length, loan amount and associated fees.
The interest rates for installment loans are based mainly on your finances and lender’s policies. However, every province has a specific maximum rate that payday lenders can charge.
For example, here’s how much you could pay for these loans:
Payday Loan | Installment Loan | |
Loan Amount | $1,500 | $1,500 |
Interest Rate | $19 per $100* ($285 or 495.3 % APR) | 29.99% APR |
Loan Term | 14 days | 3 months |
Payment Amount | Single payment of $1,785 ($1,500 + $285) | 3 x payments of $525 |
Total Cost | $1,785 | $1,576 |
Installment loan requirements vary from lender to lender. Banks often have tougher standards, while some alternative lenders are more lenient, in exchange for charging higher rates. That said, most lenders will require these documents when you apply:
Applying for an installment loan is easy most of the time. Simply follow these steps:
If so, an installment loan can be a lot safer and cheaper than a payday loan. Just make sure your finances are strong enough to cover all your payments. For more information about installment loans and payday loans in your area, check out Loans Canada today.
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Loans Canada is pleased to announce it placed No. 131 on the 2022 Report on Business ranking of Canada’s Top Growing Companies.
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