The closer you reside to an urban area like Markham, the more significant your average cost of living tends to get. Because of the expensive nature of most cities, it’s best if you can access a few different payment options for your daily, weekly, monthly, and yearly expenses.
While your savings and credit cards can always be a huge help, it can also be a good idea to seek the help of a short term loan. If you’re looking for the right type of financing and are interested in applying for a short term loan in Markham, we have all the information you need.
Learn how a short term loan can help you tackle any expense, click here.
How to Get Approved for a Short Term Loan
Generally speaking, a short term loan is a fixed amount of money that you can apply for through either a prime or subprime lender. If and when your application is approved, the money you borrow will typically be transferred into your bank account via direct deposit.
You and your lender will then negotiate a plan that allows you to repay your loan through scheduled installments (including interest and fees).
Depending on where you apply and how qualified you are, your payment plan can last several months to a few years and may be divided into weekly, bi-weekly, monthly, or semi-monthly installments. Some lenders will even permit you to make larger or additional payments throughout your plan so that you can end your debt quicker.
Choose Your Lender Carefully
When it comes to certain credit products, including loans, different lenders may have different standards for the clients that they approve or deny.
For instance, a prime lender (like a bank or credit union) can usually offer you a larger amount of credit, better rate, and more adjustable payment plan. However, their approval conditions are often harder to meet when you have bad credit, an unsteady income, or poor financial health in general.
On the other hand, subprime lenders (like private or alternative institutions) are more willing to approve your application, despite your low financial strength. The problem is that your short term loan might end up being smaller, more expensive, and have a less favorable payment plan due to the level of risk that the lender is taking on you.
Is your credit report scaring away the lender you want to work with? Check this out.
Strengthen Your Finances
That being said, lenders are mainly looking for financial stability on your part. So, when you apply, your employment history, income, current debts, and credit may be examined to confirm that you can afford all costs associated with a short term loan in Markham. The healthier your finances look, the more chance you’ll have of being approved for a larger loan with more favorable conditions overall.
So, before you apply, it’s helpful to take some precautionary measures to strengthen your finances as much as possible, such as:
- Have a steady job for a least a few months
- If that job doesn’t pay enough, consider finding secondary employment
- Create a detailed budget, save lots of income, and cut out unnecessary costs
- Pay off (or consolidate) any outstanding debts
- Check your credit report for mistakes, fraud, and identity theft
- Keep your credit score within the good range (650 – 900)
- Apply with a cosigner (optional but helpful if you have low finances)
- Offer an asset as collateral (providing loan security can also be helpful)
To learn how to improve your credit score, check out this infographic.Expenses That a Short Term Loan Can Cover
A short term loan is essentially cash in your bank account and can, therefore, be used to cover just about any expense that comes your way. Being that it has a relatively short payment plan compared to other loan types, you shouldn’t be in debt too long if you budget for and manage your installments responsibly.
Nonetheless, even a short term loan is a significant responsibility, which is why you must be extremely careful with your borrowed funds. In fact, you should only apply for a short term loan in Markham if you plan to spend the money on necessary items and situations that are out of your control.
Examples:
- High-interest debt consolidation
- Groceries and household supplies
- Floods, fires, and other home emergencies
- Accidents, repairs, and other vehicle-related emergencies
- Large one-time purchases (new furniture, appliances, etc.)
- Vacations and unexpected travel costs
How Short Term Loans Differ From Payday Loans
There are several loan types that you can access if you’re a qualified credit user. In London, two of the most common (found online and at physical lenders) are the short term loan and the payday loan. Although they are similar in that both loan types are received as lump sums of cash and need to be paid off within a relatively short time frame, they are very different in most other aspects.
Before you apply for either product, be sure to do proper research so that you’ll have a good understanding of where your money might be coming from and how it could affect your financial health.
Short term loans, the good and the bad. Check out this article.
Short Term Loans
In many ways, this loan type is more appealing than a payday loan. For starters, short term loans are offered by the vast majority of lenders in some capacity and have the potential to be much larger than the average payday loan. While every prime and subprime lender has a different way of doing business, interest rates, fees, and payment plans are usually going to be better than with payday loans.
As mentioned, under the right circumstances, most lenders will also allow you to adjust your payment plan to suit your financial requirements. Despite your loan amount being quite small compared to other products, you can typically stretch your debt out for months at a time or pay it off quicker through accelerated installments.
However, short term loans in Markham are more difficult to qualify for than payday loans, particularly if you apply with a prime lender. Not to mention that under the wrong circumstances, your debt can last longer than a payday loan and end up costing you more in the long run if you’re not being responsible during your payment plan
Essentially, if you’re qualified, a short term loan may be a safer and more practical solution than a payday loan, as long as you budget properly for any costs that may be involved.
When it comes to payday loans, it’s important to know your rights, learn more here.
Payday Loans
Unlike the product above, payday loans are found through select subprime lenders and may only come in amounts of around $100 – $1,500. They also have mandatory repayment periods of just 14-days following the deposit of funds. Typically, the full loan sum (plus any fees) is automatically debited from your bank account upon its due date. However, many borrowers find payday loans more appealing than short term loans because they are much easier to qualify for.
Generally, eligible borrowers only need to be over 19 years of age, have a steady job and active bank account, and provide proof that they are a permanent resident of Ontario. No credit check is performed and most lenders only require their clients to be earning $1,000 – $2,000 monthly. This makes a payday loan a more viable option if you have bad credit, low income, or have recently gone through financial delinquency, such as a consumer proposal or bankruptcy.
All this said, payday loans (while smaller) come with a higher financial risk because of their pricey interest rates, defaulting penalties, and administrative fees. In Ontario, lenders are permitted to charge rates of up to $15 per $100 you borrow (learn why Ontario residents are having trouble breaking the cycle of debt, click here). As a result, many government rules have been put in place to limit the amount of debt that payday loans can cause.
While this is a possibility with many lending sources, there are also lots of predatory lenders and scam artists lurking around the world of payday loans, who will attempt to charge you even higher rates or steal your identity to commit fraud.
In the end, a payday loan is only a better choice if you can’t qualify for a traditional short term loan in Markham and/or you need fast cash to finance a small-scale emergency that you’re experiencing. If you are going to apply for a payday loan, make sure to research your lender properly and save up enough money to cover your loan in full after 2 weeks.
Check out this infographic for even more information about payday loans.How to Avoid a Loan Scam
Like we said, predatory lending and scamming are possibilities when it comes to some credit products, including short term loans. So, precautionary measures must be taken before you hand over any of your personal or financial information. Don’t worry, there are plenty of ways that you can avoid a loan scam if you’re careful enough.
For instance, one way that predatory organizations will try to trick you is by offering to “guarantee” the approval of your application, no matter who you are or what your finances look like. No real lender will ever make this claim because all lenders need to perform some type of due diligence, even if it’s very basic.
Check out this article to learn how Loans Canada is dealing with loan scams.
You should also avoid a supposed “lender” if they:
- Attempt to charge you more than $15 per $100 borrowed
- Use aggressive or disrespectful sales/debt collection tactics
- Contact you for payment outside of designated business hours
- Harass your friends, colleagues, or family members when they can’t contact you
- Don’t have a confirmable address and/or valid business license
- Refuse to answer your questions or give vague, unsatisfying answers
- Demand some form of payment before depositing your loan
- Hide any fees (all loan costs must be displayed through advertising and contacts)
Pros and Cons of Short Term Loans
Let’s wrap up by discussing some of the pros and cons associated with the average short term loan in Markham. Since these issues can drastically affect your finances, make sure to read them through carefully, then speak to a financial advisor and compare your other options before you apply.
Pros
- Easier to get approved for than most larger loans
- Payment plans are often adjustable
- Accelerated payment options can help you complete your loan faster
- Every full, timely payment will improve your credit score
- A good way of covering necessary expenses and diversifying your credit report
Cons
- Shorter payment terms often lead to higher interest rates
- Subprime loans can be slightly more expensive than prime loans
- Predatory lending and scamming are possible if proper research isn’t done
- Consumer debt and credit damage can occur if you default on your payments
How to Find The Right Short Term Loan in Markham
Living in a major metropolitan area can be expensive, especially if you don’t have the right financial tools on your side. If you’re searching for a short term loan in Markham to cover the cost of an unexpected expense, Loans Canada can help.
