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If you have a pressing need to access money quickly in order to cover a major expense in Alberta, then an installment loan may be the right option for you. While there are several different types of loans out there that you may want to consider, an installment loan is just one way to get your hands on funds quickly while taking advantage of convenient repayment terms.
An installment loan is simply a type of loan that involves taking out a specific loan amount that will need to be repaid within a specified loan term. During this repayment period, the loan amount will be paid back in installments, usually in the form of fixed monthly payments until the full outstanding balance is repaid.
Want to know how your payment history affects your credit score? Read this.
Each payment made will include a principal portion as well as an interest portion. The exact ratio will depend on the loan amount taken out and the interest rate charged by the lender.
What’s the Difference Between an Installment Loan and a Payday Loan?
While payday loans and installment loans are both convenient ways to get access to cash fast in Alberta, there are significant differences between them. Most predominantly, the main differences are:
The length of the loan term
The loan amount
The repayment terms
Payday loans usually come with very short loan terms. Typically, the loans need to be paid back by the time the next payday rolls around, hence the name. Payday loans also have to be paid back in one lump sum as opposed to in installments.
These types of loans are also only for limited amounts, usually no more than $800 or so, while installment loan amounts can be much higher, depending on the credentials of the borrower. Furthermore, payday loans usually come with extremely high-interest rates and fees, which isn’t necessarily always the case with installment loans in Alberta.
Interested in more information about the payday loan cycle of debt? Click here.
Do Installment Loans Have to Be Used For a Specific Purpose?
There are various types of installment loans in Alberta. For instance, auto loans, home loans, and student loans are all versions of installment loans. In these cases, the loan amount given is to be used for one specific purpose, which is either to pay off a car, a house, or college tuition, respectively.
However, you can also take out a personal installment loan, in which case you can use the money for any purpose you see fit. For instance, common reasons for taking out these types of loans in Alberta can include:
Home improvement projects
Medical or dental purposes
The list can really go on and on. As long as you are able to make your regular monthly payments on time and in full every month, your lender in Alberta shouldn’t care what you use your loan for.
Check this out to see what happens when you can’t make your loan payments on time.
What Credit Score is Required to Get Approved For an Installment Loan in Alberta?
A credit score is an important factor that lenders consider before approving borrowers for installment loans in Alberta. Typically, lenders like to see credit scores of at least 650 before approving loan applications, though the number should ideally be even higher than that.
Borrowers in Alberta who have a credit score in the 700s are more likely to not only get approved for an installment loan but also get a lower interest rate, which makes the overall loan more affordable.
On the other hand, borrowers in Alberta with a score of less than 650 will be less likely to get approved. If they are approved, they will probably be stuck with a higher interest rate in order for lenders to be more protected in case the borrower defaults on the loan.
Trying to understand your credit score and credit rating? Look at this.
What About Bad Credit Installment Loans?
However, there are bad credit lenders in Alberta who work specifically with borrowers with bad credit, so it is certainly still possible to secure an installment loan with a score that’s considered less than par.
That said, borrowers in Alberta with poor credit should make the effort to improve their credit scores in order to improve their chances of securing an installment loan at more favourable interest rates.
Check out this infographic to learn how the credit bureaus calculate your credit score.
What Kind of Payment Plans Are Available in Alberta?
Installment loans have several different payment plans for borrowers to choose from. The monthly payments will vary depending on specific factors, including the following:
Loan term – Installment loans can vary in terms, with shorter terms and longer terms available depending on the needs of the borrower and what lenders are willing to offer.
Interest rate – Lenders may offer both fixed-rate and variable-rate loans, though it is more common for installment loans to come with fixed rates.
Payment type – Installment loans typically come with fixed payments as mentioned above, making each payment the same every billing cycle. If the interest rate is variable, then each payment could fluctuate based on changes to the rate.
Fees – Many installment loans come with upfront fees that borrowers must pay right out of the gates, some also charge monthly servicing fees.
What kind of income is accepted for installment loans in Alberta?
The primary concern for most lenders is that you have a recurring source of income. Installment loan payments are best scheduled along with your direct deposits to avoid declined payments. Lenders will consider many forms of recurring income that aren’t employment income. These can include different government financial programs such as CCB, EI, and CPP. The lender will typically require you to submit documents with your loan application. These will prove that you are receiving recurring income into the account where loan payments will be taken from.
What’s the difference between an installment loan and a payday loan?
Payday loans are not the only option for those with bad credit. Installment loans are generally a better option since they have much lower interest rates. Payday loans can charge up to 600% annual interest, whereas installment loans cannot charge more than 60%. Installment loans can also be repaid over a longer period of time, making them much more flexible. Payday loans are typically due by your next paycheck.
What kind of payment plans are available for installment loans?
The most common installment plans are typically monthly or biweekly payments. Weekly or semi-monthly plans are also sometimes available but less common. Which payment plan you choose can be just a matter of preference. Ideally, you’d like your loan payments to coincide with your income deposits. This minimizes the chance of a payment being rejected and incurring penalties from your lender and your bank.
An Installment Loan That Works For You
Installment loans in Alberta can come in really handy when a major expense needs to be covered but your bank account isn’t equipped with enough money. If you’ve got a decent credit score and a steady income, getting approved for an installment loan with a reasonable interest rate shouldn’t be a problem. If you live in Alberta and are in the market for an installment loan, Loans Canada can help.