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Do you have a big expense to cover, but your bank account isn’t padded with sufficient funds to cover it? If so, you’re among thousands of other Canadians in the same shoes. Financial woes can be stressful when there’s not enough money in the pot to cover your bills. But there are ways to get your hands on the money needed to cover any one of your big expenses, including installment loans in Quebec.
Personal loans in Quebec can also be helpful.
Installment Loans – Defined
Installment loans are a type of loan in which you repay the loan amount borrowed in installments, hence the name. Typically, payments are made in monthly installments, although, other payment arrangements can be made, such as bi-weekly, weekly, or semi-monthly, depending on what your lender offers.
What happens when you can’t make your loan payments? Find out here.
Loan amounts will differ depending on your financial health and the lender, as will the interest rate. The term of the loan can be as little as a few months to as long as 30 years. Each payment made will include both the principal amount and an interest portion. The amount paid at every installment will depend on the loan amount, the term of the loan, and the interest rate being charged.
Are Installment Loans Like Payday Loans?
No, they are two different loan products that are dissimilar in many ways. For starters, payday loans usually involve a much smaller loan amount, typically no more than $1,500, whereas installment loans can involve tens of thousands of dollars in some cases.
Payday loans must be repaid in a much shorter period of time, typically when the borrower’s next paycheck comes in, as opposed to installment loans, which are repaid over a much longer period of time. The repayment method also differs: while installment loans in Quebec are repaid in installments over time, payday loans must be paid back in one lump sum.
Interest rates with payday loans are usually much higher as well, some as much as 500% APR (annual percentage rate) or more.
Take a look at this infographic to know how the payday loan cycle could affect you.
Installments are much more affordable options that provide more money and easier repayment terms, which makes them a much more attractive loan option to residents in Quebec.
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How to Qualify For an Installment Loan
In order to qualify for an installment loan, borrowers must meet certain criteria that are similar to other types of loans, including the following:
Good credit score – Lenders will pull your credit report before extending a loan. Generally speaking, lenders like to see a credit score of at least 680 before they approve a borrower for an installment loan, though there may be cases where a lower score may still be eligible for approval.
Borrowers with a higher credit score will not only have an easier time getting approved for an installment loan in Quebec but will also be given a lower interest rate, which makes the overall loan much more affordable over the term. Lower credit scores make it more difficult to secure a loan and will result in a higher interest rate being charged.
Here’s how you can increase your credit score without increasing your credit card debt.
Income – It should come as no surprise that a borrower’s income plays an important role in the installment loan approval process. You will need to prove that you’ve got an adequate income to be able to repay the loan amount borrowed. Your lender may want to see proof of income in the form of pay stubs and employment letters.
Do you have a low income? Read this to learn how you can get out of debt fast.
Debt-to-income ratio – Not only does your income matter, but so does your debt load. You might make a very good living, but if your current debt load is already too much for your income to handle, adding more debt to the pile could put you over the edge. For this reason, lenders will want to know how much debt you currently carry relative to your income before approving you for an installment loan.
Want more information about credit scores? Take a look at this infographic. Can I Qualify With Bad Credit?
As already mentioned, your credit score plays a key role in your eligibility for an installment loan. Conventional lenders usually only deal with borrowers who have good credit scores.
However, a bad credit score won’t necessarily take you out of the running for an installment loan in Quebec. There are alternative lenders out there who deal exclusively with bad credit borrowers to help them secure a loan.
In this unique case, the lender will consider other factors aside from your credit score to approve you for a bad credit loan. If you can prove that:
- You make a good income
- Have a steady job
- That you don’t have too much debt
Alternative lenders may be willing to extend an installment loan to you without the need to have good credit.
Living in Montreal? Click here to learn about bad credit loans in your city.
The biggest drawback of a bad credit loan is that the interest rate will more than likely be higher than a loan provided by a conventional lender to a borrower with good credit. This interest rate can vary quite a bit from one lender to another and depend on your exact financial situation. In any case, interest rates on these types of loans are usually quite high and will make the loan more expensive.
If you have bad credit, you may want to consider taking steps to improve it before you apply for an installment loan in Quebec. There are credit counselling services available that can help educate you on making better financial choices and the measures that should be taken to give your credit score a boost. That way you will be able to secure a conventional installment loan much more easily and be awarded a lower interest rate.
Considering getting credit counselling in Quebec? Read this first.
Frequently Asked Questions
Are installment loans better than payday loans in Quebec?
Yes. In fact, Quebec has effectively banned payday loans by limiting the annual interest rate for all loans to 35%. Other provinces have maximums of between 400-650% for payday loans (60% for other types of loans). The lower rate in Quebec makes installment loans ideal for paying off a major purchase in small installments.
What’s the best payment plan for an installment loan?
The answer to this varies from person to person. The most important factor is when your direct deposits are scheduled. Lenders prefer that loan payments coincide with your direct deposit income. This lessens the chance of declined payments, increased fees, and headaches for both sides. Most payment plans are typically biweekly or monthly. If your direct deposits are neither, then choose the schedule that’s closest.
Is it possible to get a loan in Quebec with bad credit?
It is possible but will be a bit more difficult. Typically, banks and major institutions will not be willing to extend credit to borrowers with poor credit. Instead, you may need to seek out alternative lending firms. Seek out lenders that do not rely on a credit report alone. Some also look at your income, existing debts, and other factors to make a more nuanced decision.
Is an Installment Loan Right For You?
If you’re in a financial pickle and are in need of financial assistance to help cover some of life’s big expenses, an installment loan may be a great fit for you. However, it’s important to take a closer look at your financial situation before you apply for a particular installment loan in Quebec. If you are interested in finding out more about installment loans and where to get one, Loans Canada is here to help. Get in touch with us today!
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