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Most people try their best to make sure they stay on top of their bills. And while it’s normal to carry around some amount of debt, drowning in it can put a person in a dire financial predicament. Not only that, but many consumers live paycheck to paycheck, which means that any unexpected expense that creeps up can send people scrambling to find the funds needed to cover it.
In situations like these, some financial assistance can really help. That’s where short term loans in Brampton can be very useful. With these types of loans, you can quickly get the money you need to cover a pressing expense. They can really save the day, especially if you’re on the cusp of having collection agencies and creditors knocking on your door.
Read on to find out more about short term loans to see if this is the right product for you.
What is a Short-Term Loan?
Short-term loans are meant to be used to pay for last-minute expenses, then paid off within a short time period, hence the name. Typically, borrowers are required to pay the loan amount back – plus interest – within a few a year or two. The loan amounts are also rather limited compared to longer-term loans and are typically made for no more than two thousand dollars.
What’s the Difference Between Short-Term Loans and Payday Loans?
The definition of a short-term loan may sound very similar to that of a payday loan. Since they’re both short-term loans that are made for a limited amount of money and need to be paid back shortly after being taken out, aren’t they pretty much the same?
No, they’re not. In fact, short-term loans and payday loans are different in a few key ways, including the following:
Payments – Like most other types of loans, short-term loans in Brampton require the full amount to be repaid in installments rather than one lump sum. That means you would have the opportunity to make a select number of payments over a period of time to pay off the loan amount in its entirety. On the other hand, payday loans must be paid back in one lump sum, which makes these types of loans much more difficult to pay off.
Take a look at this article to learn about why Ontario residents are having trouble dealing with payday loan debt.
Time allowed to pay off the loan – While both short-term and payday loans require the funds to be repaid within a relatively short period of time, the amount of time that consumers have to repay a payday loan is much shorter than a short-term installment loan. As already mentioned, short-term loans allow for repayment over a year or two. But payday loans need to be repaid within two weeks, on the borrowers next payday, hence the name.
Rate charged – Short-term loan rates are usually higher than those with longer terms. That said, they’re usually much less than the rates that are typically charged on payday loans. In fact, payday loan interest rates can be in the triple digits.
Approval – Payday loans are notorious for being easy to get approved for. In fact, approval can be as quick as a few hours, and the funds can be distributed the same day. Short-term loans are provided by lenders who typically take more time to ensure that consumers have the financial ability to fully repay the loan amount within the specified allotted time.
Tips For Getting Approved For a Short-Term Loan in Brampton
In order to secure a short-term loan, you will need to prove to the lender that you are financially capable of making each payment on time when they come due, right up until the entire loan amount is repaid, with interest. In order to do that, you’ll need to supply the lender with a few pieces of information, after which the lender will look over all pertinent data to make sure you’d be a responsible borrower.
One of the key components to getting approved for a short-term loan is to make sure your credit score is up to par. To maximize your chances of loan approval, consider doing the following:
Get a copy of your credit report – The first thing you may want to do is pull your credit report, which you can do for free once every 12 months. Look through it and make sure all information is correct. If you find mistakes, have them corrected right away, as these errors could be pulling down your credit score.
Want to learn how to read your credit report? This article is for you.
Give your score a boost – If your credit report shows that your credit score is lower than it should be, take steps to improve it. Your credit score plays an important role in your ability to secure a loan, including a short-term loan in Brampton, so it’s essential that it’s at least 650, which is often the minimum score lenders require before they approve a loan application.
If your score needs a boost, any of the following steps can help improve it:
- Pay all bills on time
- Make more than your minimum monthly payments towards your credit card bills
- Don’t spend any more than 30% of your credit card limit
- Cut back on spending in general
- Keep old credit accounts open
- Don’t close any accounts that still have an outstanding balance
- Pay down your debts
- Take out a secured credit card and make timely payments on it
Work with the right lender – Each lender offers different short-term loan products, so you want to do some comparison shopping to see who will be able to provide you with the loan product that best suits your needs.
Come up with a budget – It can be tough to know exactly how much money is going out relative to the amount coming in. To see exactly what your situation is, establishing a budget – and sticking to it – can really help.
What Can Short-Term Loans Be Used For?
The funds you receive from a short-term loan in Brampton can be put toward any number of things, including the following:
- Car repairs
- Home improvements
- Medical procedures
- Unexpected emergencies
- Unexpected travel
- Furniture or appliances
- Building credit
This list is by no means exhaustive. That said, it’s suggested that you only take out a loan to cover a pressing expense rather than to pay for an unnecessary purchase. Adding more debt to the pile should never be considered unless there’s real pressure to cover it.
For instance, if your car needs to be repaired right away or you have an emergency medical procedure that is not covered, then a short-term loan may be warranted. But piling on more debt to go on a shopping spree to fill your closet or paying for an elaborate vacation might not be worth the effort to pay off all that debt. Be sure that the money you’re spending is for a good reason.
A short term loan can help you tackle any expense, click here to learn more.
Advantages and Disadvantages of Short-Term Loans
Short-term loans are sought after by people who are in quick need of a little extra cash. As such, they can be quite handy. These types of loans are also faster to get approved for and provide the needed funds more quickly compared to traditional long-term loans.
However, there are some drawbacks to these types of loans. For instance, the interest rates charged are typically much higher compared to long-term loans, making them more expensive overall. Further, the amount of money that can be borrowed is rather limited, and there are predatory lenders in the short-term lending sphere that you should watch out for.
Do You Need a Short-Term Loan in Brampton?
If money is tight and you have an expense that needs to be paid right away, a short-term loan in Brampton may be able to help. Be sure to work with a trustworthy lender who will provide you with a product that you can comfortably repay. To find that lender, Loans Canada can help. Call us today and we’ll put you in touch with the right lender for you.