When life just isn’t going your way and your finances can’t quite seem to catch up, a short term loan can help you and your family get back on track. Whether you were caught off guard by an emergency or you’re simply looking to get ahead of this month’s bills, a short term loan can help spread out the costs and make it more affordable.
A short term loan is a specific amount of money that you can borrow, either online or in-person, from almost any lender in Canada. Short term loans typically involve less money than other installment-based loans and the average repayment term only lasts 1 – 2 years.
When you’re approved for a short term loan, the money will be deposited directly into your bank account as a lump sum. You will then follow a plan that allows you to repay the loan through equally divided installments with interest.
It’s impossible to predict the future but at least you know you have options when the future arrives and it’s a little more complicated than you thought it would be. Short term loans can cover the cost of any bill, expense, or emergency you need, including but not limited to:
Although the conditions of your short term loan will vary depending on where you apply and how qualified you are, there are normally two types that you can apply for:
The majority of short term loans that you’ll find are installment-based, meaning the full loan sum will be separated into installments that you would pay off periodically until your plan is complete. While every borrower has different preferences when it comes to their budgetary restrictions, short term installment loans can be beneficial for a number of reasons.
In many provinces, you can also find a short term loan known as a payday loan. Like a traditional short term loan, this involves a relatively small sum of cash that you can apply for at a physical location or online. Payday lenders will usually only offer loans of $100 – $1,500, with much shorter repayment terms of 14-days. The only documents required for approval are government identification that proves you’re at least the age of majority in your province, as well as proof of your permanent residency, steady income, an active bank account. Other benefits of a payday include:
When deciding to apply for a payday loan, it’s important that you take into consideration all of the costs associated with it.
Interest rate. Interest rates on payday loans are extremely high. Depending on the province you live in it can cost between $15 to $25 per $100 you borrow. That is equivalent to an APR of 300% – 650%.
Fees. In many provinces, the full loan cost is automatically debited from your bank account on its due date. As such, if you don’t have sufficient funds you can be hit with a NSF fee.
Rollovers. Rollovers – Some provinces also allow ‘rollovers’, meaning you to apply for a second loan before your first is repaid.
Payday Loan Cycle. Payday loans are notorious for trapping Canadians in payday loan cycles. All these risks may lead to massive debt problems, especially if you already have poor financial health.
Every borrower’s financial situation is different, so the short term loan that you choose should be based mainly on what you can afford in terms of your repayment plan.
A traditional short term installment loan is a safer, more practical option when you have strong finances, good credit, and the ability to afford all costs associated with it. It may also be a more effective tool if you’re dealing with larger expenses or those that need to be financed gradually.
A payday loan, on the other hand, maybe a more straightforward solution when you have unhealthy finances or an expense that needs immediate coverage. Then again, payday loans are far riskier in many respects, so they are only the right solution when you’ve exhausted all the more conventional options.
Learn how to apply for a loan in Canada.
The decision to apply for a short term loan can be a difficult one to make, as there are many different factors to consider. To help you decide, take a look at the following list of pros and cons:
If you’re about to apply for a short term loan, especially one that’s catered toward bad credit, it’s important to research your lender properly to confirm that they are a legitimate business.
Unfortunately, that’s because there are many predatory organizations and scam artists out there that are relying on your need for a loan. One way they will attempt to fool you is by claiming that you have to pay “loan insurance” before they can approve you.
In reality, no legitimate lender will ever ask for payment before your loan is deposited, because it is illegal to do so in Canada. If a supposed lender ever attempts this scam or seems untrustworthy for some other reason, be sure to avoid them.
Depending on the way you handle your loan, your credit may be affected negatively or positively.
The health of your credit is extremely important when applying for future credit products, as lenders will often use it to judge how much they’ll allow you to borrow, as well as what interest rate you would qualify for. The better your credit score is, the more creditworthy lenders will consider you, so your loan will be larger and more affordable.
If you’re looking to solve your financial issues with the help of a short term loan, don’t hesitate to contact Loans Canada. We can set you up with the best lenders and rates in your area. Simply call us today or check out our website for further information.
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