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📅 Last Updated: March 6, 2024 ✏️ Written By Kale Havervold 🕵️ Fact-Checked by Caitlin Wood
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While many of us in Alberta like to think we’re financially prepared for any financial emergency that may come about, that isn’t always the case. In fact, those in Alberta and the rest of Canada are actually not as prepared as you may think, with only about 25% having a rainy day fund set aside for emergencies.
Click here to learn how you can start saving when you have too much debt.
This means if something like a car accident, medical emergency, or unexpected expense takes place, most people will be unable to respond and could end up in financial trouble.
Thankfully, short term loans are here to save the day. These are generally smaller loans (about $100-$2000) that need to be repaid in a shorter amount of time than a standard loan, typically between one and two years.
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Short Term Loans vs. Payday Loans
When people in Alberta hear the term short term loan they often think that it is just another name for a payday loan, but that isn’t the case. While there are some similarities, there are also many differences between the two.
Similarities
- Both will generally have larger interest rates than standard unsecured loans, as there is a shorter repayment period. But it’s important to note that the average payday loan has an APR of 500%.
- Both loans can be used for anything, but are often applied for when people need a small amount of money quickly for emergencies or to hold them over until they are paid next.
Differences
- While both have a shorter repayment time, a short term loan’s repayment period can be up to two years, while payday loans are generally repaid within two weeks.
- Payday loans have few requirements which often leads to consumers applying for one when they cannot afford to.
- Due to their quick repayment periods and interest rates that are generally very high, payday loans can lead to getting stuck in the cycle of debt.
Check out this infographic on the payday loan cycle to see how it could affect you.
While short term loans are generally better if you have a bit of flexibility and want to keep your loan affordable, payday loans give you the benefit of near-immediate cash within only a few hours, in many cases. But with that in mind, the cost of a payday loan without a doubt outweighs any of its perceived benefits.
For more information about payday loans in Alberta, read this.
How to Qualify for a Short Term Loan in Alberta?
One of the great things about short term loans is just how simple and quick they are to apply and qualify for in Alberta. Despite this, there are a few things you should look to do to ensure you have a great chance at qualifying for a short-term loan:
- Ensure that your credit score and credit report are in good standing. While not every short term loan requires a credit check, some will, and you want to be prepared for that.
- The more lenders you visit and connect with in Alberta, the better. Each lender will have their own terms and rates, so you want to search around until you find a lender you are comfortable with.
- Your finances should look clean. You should have no (or a small manageable amount) of existing debt and you want to make sure you will be able to keep up with the payments without defaulting.
Short Term Loans FAQs
Of course, you want to learn as much about a loan option before you decide to go with it. In an effort to help in that regard, we have decided to include a short FAQ with some common questions and concerns about short term loans.
What Are the Interest Rates on Short Term Loans?
The actual interest rate you will get will depend on how risky or safe the lender thinks you are. The riskier you are, the higher your interest rate will be. Normally, the rates for short term loans are generally higher than interest rates on other loans like a mortgage or car loan.
If you’re about to go shopping for low-interest rates, read this first.
Are There Guaranteed Approval Short Term Loans?
When looking for a loan, being approved is the most important thing on your mind. As a result, when a lender says they offer a “guaranteed approval” loan, it can be enticing. However, no one can guarantee the approval of a loan as it depends on so many different factors. If they do, there is a good chance it is a scam.
To know how you can avoid a loan insurance scam, click here.
How Much Can I Get With a Short Term Loan?
Generally, these loans can fetch anywhere from $100 up to $2000 dollars. So it isn’t meant for buying a car or home, but more to cover you in the case of emergencies or other unexpected events. As for how much you yourself will actually be able to get, that will depend on your attractiveness as a borrower and how much risk you carry.
Ever wonder what the true cost of borrowing is? Click here.
Frequently Asked Questions
What is a short-term loan?
There are many types of short-term loans. They are typically no more than $1500. They are usually repaid within 2 to 8 weeks, sometimes up to 3 months. Personal loans, credit cards, and payday loans are among the more common types of short-term loans. Due to their short terms, loan providers usually charge higher rates on these types of loans. Payday loans are the highest, sometimes exceeding 500% APR. Personal loans and credit cards generally have rates of between 10% to 36%, not exceeding the federal limit of 60%.
Can I get a short-term loan in Alberta if I have bad credit?
Yes, it is still possible to get a short-term loan even with bad credit. Some lenders offering personal or payday loans might not check your credit to determine if you qualify. They’re more concerned with short-term financial health to see if you can afford the payments. However, you’ll need to provide additional documents to verify your identity, banking details, address, and income source. Putting up collateral (such as a vehicle) might be another option to convince a lender to approve your short-term loan. Similarly, a security deposit on a secured credit card will generally negate a poor credit score and will help you rebuild your credit.
What happens if I pay off my short-term loan early?
You can pay less interest by paying your short-term loan off early. For example, the average credit card gives you a grace period, up until the next due date, to pay the balance in full with no interest charges. Be mindful, however, that cash advances do accumulate interest as soon as they’re issued. Where payday loans are concerned, Alberta does not allow providers to charge a penalty for repaying a loan before the due date. Open-end or flexible personal loans can be paid off early with no consequences. Closed-end or fixed-term personal loans generally will have some kind of penalty for settling the balance before the due date. Check with your lender to find out which kind of loan you have.
Alberta Short Term Loans For You
The good thing about short term loans is that there is a wide variety available to you in Alberta and beyond. No matter your wants or needs out of a loan, we at Loans Canada are confident that we can help you out.
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