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In Kitchener, you’re likely to come across many different lenders offering a multitude of credit products, any of which can come in handy during plenty of financial situations. This is particularly true within the urban sector, where living costs are quite high.
If you have lots of necessary costs to cover, a short term loan might be the exact credit product you need, keep reading to learn more about short term loans in Kitchener Ontario.
Short term loans, the good and the bad. Check out this article.
“Guaranteed” Short Term Loan Approval
A short term loan is a relatively common credit product in Canada and is a specific amount of money that you can borrow from various credit lenders in the Kitchener area. This might be a bank or other prime lender, or an alternative/private company.
If your application is approved, your loan would be deposited as a lump sum directly in your bank account. You would then repay said money through equally divided and scheduled installments (with interest). While the length of your repayment plan will vary depending on your lender’s policies and how much you borrow, most short term loans are meant to be paid off within a year or two.
Is guaranteed approval really possible? Find out here.
How to Earn Better Approval Results
Although the average short term loan is a somewhat smaller financial responsibility than many other credit products you can apply for in Kitchener, it is still important to prepare yourself properly before entering the application process. This is because your lender will need to inspect your finances and often your credit report to determine whether or not you’re actually qualified to handle the liquid money that you would be borrowing.
Essentially, strong financial health is a sign that you’ll be responsible and pay back your loan on time. As a result, lenders will generally be willing to let you borrow larger with better interest rates.
So, if you want the best approval results and conditions when you apply for a short term loan, it’s a good idea to step up your financial health by:
- Holding down a steady job for at least 6 months
- Regularly transferring a portion of your income into an emergency savings fund
- Organizing the financial documents your lender requests (proof of income, etc.)
- Checking your credit report for identity theft, fraud, or informational errors
- Raising your credit score as much as possible (ideally to the 660 – 900 range)
- Paying off any outstanding debts you have (credit card bills, etc.)
- Finding a stronger borrower to cosign your application (optional but helpful)
How to Avoid a “Guaranteed” Loan Approval Scam
Another essential step when applying for a short term loan in Kitchener is to take an appropriate amount of time selecting your lender. For instance, while most prime lenders can offer you a larger loan with a lower rate, it may be harder to get approved because their qualifying standards are more restrictive (and vice versa for subprime lenders).
Not only will comparing lenders potentially help you find the best rates and conditions for your short term loan, but it can also help you avoid the danger of a loan scam, which can occur if you don’t do proper research prior to handing over your financial information.
One clear way to spot a loan scam is if your supposed lender says they can “guarantee” that your application will be approved, no matter who you are or what your financial health looks like. Of course, they will only do this if you agree to pay a fee, which they might call “loan insurance” just to throw you off.
Although you can certainly make yourself a stronger candidate and there are lenders who have higher approval quotas than others, no legitimate financial institution will ever make you this promise. In fact, a 100% approval guarantee is an illegal claim, so be sure to avoid them if their deal seems too good to be true.
Learn how to tackle any expense using a short term loan, click here.
Short Term Loans Compared to Payday Loans
Remember, while you should always be on the lookout for a loan scam, there are indeed some lenders in Kitchener who will be less restrictive when approving clients.
Those with the highest approval quotas are often alternative institutions, where you may have to pay more interest for a smaller, less adjustable loan. This is mostly because of the risk they are taking by approving a client that could have a serious debt problem, bad credit, or a recent bankruptcy in their profile.
A prime example of one of these bad credit institutions is a payday loan lender, where you can apply for a small short term loan of $100 – $1,500. Similar to a regular short term loan, this involves a lump sum of money being automatically deposited into your bank account, which you’ll pay back over time with interest.
However, payday loans are far different (and usually more risky) because:
- The average repayment term is only 14 days long
- Interest rates may be as much as $15 per $100 borrowed (Ontario’s legal limit)
- Scams and predatory lending (illegal rates) are more possible because payday lenders are harder for the government to regulate.
- The full payment is automatically withdrawn from your bank account on its due date and a steep penalty will apply for NSF (non-sufficient funds).
The main appeal of payday loans is that they are convenient and easy to get approved for. You only need to prove that you’re steadily employed, are a permanent resident of Ontario with an active bank account, and that you’re at least 19 years old. As long as you pass their minimum qualifications and can afford your full payment, the money would be transferred into your account within 24 hours.
This makes the payday loan a viable solution when you have very weak financial health, issues with unpaid debt, or a small scale financial emergency on your hands, but can’t get approved by a more conventional lender. Otherwise, the lower risk associated with a normal short term loan may be more worth the effort.
The Pros, Cons, and Recommended Uses of a Short Term Loan
Now that you’re aware of what a short term loan is and how best to find one that suits your lifestyle, let’s take a look at a list of the benefits, drawbacks, and the best ways to use one so that you can finally determine whether it’s the product for you.
- Approval is easier to obtain than larger, more expensive loan types
- Repayment plans are shorter and usually easier to manage
- Smaller loan amounts mean less chance of defaulting on payments in the future
- Completing your payments responsibly will increase your credit score and look great on your credit report, making this a good introductory credit product
- Lenders often charge higher interest rates for smaller loans/shorter terms
- Scamming, fraud and identity theft are possible if prior research isn’t done.
- Having bad credit, a low or unsteady income, and outstanding debt can make your loan more expensive and harder to obtain.
- Defaulting on your payments can result in penalties, added interest, severe debt, and an overall decline in the health of your credit/finances.
- Vacations and travel costs (plane tickets, unexpected events, etc.)
- Large purchases (furniture, appliances, etc.)
- Financial emergencies (car accidents, medical issues, etc.)
In the end, a short term loan is still a financial responsibility, no matter how small it is or where you apply for it in Kitchener.
So, if you think one of these loans is right for your situation, be sure to prepare your finances for inspection, prove that you’re going to be responsible with your payments, and, once approved, only spend the money on things that are absolutely necessary.
Get Your Loan Through Our Network Today!
If you’re interested in applying for a short term loan in Kitchener, don’t hesitate to contact the Loans Canada team first. We can help you find whatever loan or other credit product you’re looking for. Call us today or check out our website for further information.