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Even though the cost of living in Montreal can be a bit cheaper than other major cities in Canada, your daily expenses can still be cumbersome, especially if you reside in or around the urban centre. While you might be making a decent income and credit cards can be a great help, it’s possible that you’ll need to apply for a loan someday.
In that case, a short term loan might be exactly what you need.
Common Short Term Loan Questions
If you’ve never applied for a short term loan in Montreal but are interested, here are a few of the common questions that the average Montreal borrower might have about the process:
What is a Short Term Loan?
A short term loan is a product that can be applied for through almost any type of lender, such as banks and credit unions (prime lenders), as well as private, alternative, and bad credit organizations (subprime lenders). These loans come in the form of a lump sum of cash, deposited directly into your bank account upon approval.
What’s the difference between a bank and a credit union? Find out here.
What Will the Payment Process Look Like?
A short term loan is an installment-based product. As such, when you’re approved, you and your lender will work out a payment schedule that best suits your financial profile. After you’ve received your loan, you’ll start paying it back with a series of equally timed and divided increments, including an interest rate for your lender’s service. While monthly payments are common, some lenders may offer the option of weekly, bi-weekly, or bi-monthly installment plans. Depending on the size of your loan, your total payment plan may last several months to a few years, which is shorter than other loan types.
Look here for some information about installment loans in Montreal.
What Interest Rate Will My Lender Charge?
As we mentioned, every short term loan in Montreal comes with an interest rate, which is a fee that your lender charges to make a profit. However, not all interest rates are the same. The rate you receive will be based on several elements, such as:
- Your income and overall financial ability
- Your employment status
- The strength of your credit score and credit report
- The value of your assets (if you offer any)
- The financial strength of your cosigner (if you have one)
Generally, your interest rate will be based on your “creditworthiness”. The more you can prove that you’ll be able to afford your loan, the lower (more affordable) your rate will be. For example, having a good credit history and a decent income shows that you’ll be able to make payments on time and in full. As such, your lender will often reward you with a better rate than someone who has the opposite level of financial ability.
Check out this infographic for more information about credit scores.
What Credit Score Should I Have When I Apply?
The health of your three-digit credit score may also be important for the outcome of your short term loan in Montreal. This is because your score represents your ability to make payments for your active credit products. Your credit score ranges from 300-900. The closer your score is to 900, the more chance you’ll have to be approved for a larger loan amount and a more reasonable interest rate.
If you have bad credit (a score of 300-600) the opposite effect may occur. Although you can still get approved for a bad credit loan through a subprime lender, your approved amount will be lower and your interest rate higher the worse your credit is. For the best results, it’s best to apply when your credit score is at around 680 or more.
My Lender Offer Me Guaranteed Approval. Should I Accept?
Be very careful when it comes to the notion of “guaranteed” approval! While there are plenty of ways to increase your financial ability to the point when approval is a more of a sure thing, a 100% guarantee for a short term loan in Montreal is not something any real lender will offer. In fact, such offers are illegal in Canada.
In reality, every lender needs to analyze your financial strength before granting you a loan. Good strength equals a good chance of approval. However, if any supposed short term lender tells you that they’ll approve you with no effort, stay away from them! They may be a scam artist trying to force you into buying fake loan insurance for the purposes of stealing your money and financial information.
Should I Consider a Payday Loan Instead?
Actually, a payday loan is a short term product that you should be extremely cautious about applying for. While they can be efficient under the direst of circumstances, such as when you have terrible credit or when you need money for an immediate financial emergency, they can also do massive damage to your finances.
Unlike a regular short term loan in Montreal, a payday loan comes with a non-negotiable payment term of 14-days following approval. If you miss your payment date, you’ll be subject to a hefty penalty. In addition, interest rates for payday loans are extremely high, no matter what your financial strength looks like. Even further, payday loan websites are another place where scamming and predatory lending are strong possibilities. In fact, all these dangers have led to payday loans being effectively banned in the province of Quebec.
Are There Other Ways to Increase My Chances of Approval?
Like we said, one way to gain easier access to a short term loan is by improving your credit as much as possible. There are also a few other tricks you can use to boost your approval odds, earn a larger loan amount, and get lower interest rates, such as:
- Ask your employer for a pay raise or extra hours at work.
- Prepare paychecks, bank statements, and other relevant financial documents for your lender to inspect.
- Check your credit report regularly to monitor your credit health
- Dispute any errors or signs of identity theft or fraud you find
- Pay down any outstanding debts (credit card bills, other loans, etc.)
- Create a proper budget and cut down on unnecessary expenses
- Compare lenders in Canada. Choose one that’s reputable and has your financial needs in mind.
Look at this list of 20 ways to secure a loan
Benefits and Drawbacks of Short Term Loans In Montreal
As it is with any credit product, a short term loan in Montreal does come with a few benefits and drawbacks that need to be considered prior to applying, as they may have an impact on your financial health in the long run.
- If you have healthy financial strength, most lenders will be open to some negotiation in terms of your payment plan and payment amounts
- They’re a good solution for small to large one-time expenses
- They can help you reduce your credit card debt
- You won’t have to use up your savings right away
- Loan deposits are generally received within 1-2 business days
- The application process is simpler compared to larger loans
- You’ll build and improve your credit score whenever you make a responsible payments
- Unless you offer collateral, interest rates are sometimes higher than other loan types, given your shorter payment term
- Scamming, fraud and identity theft are possibilities if you’re not cautious
- Failure to make responsible payments may result in damage to your finances and credit health
Learn all about the true cost of borrowing, click here.
Where Should My Short Term Loan Be Invested?
Since your short term loan is a lump sum of cash, you can use it for almost any cost. That said, a short term loan will also put you in debt. Therefore, it’s far better to only invest your money in expenses that are essential, such as:
- Consolidating high-interest debt
- Health costs not covered by insurance (medications, elective surgeries, etc.)
- Covering a car accident or other financial emergency
- Home repairs, new appliances, or other household costs
- Building good credit for your financial future
Getting a Short Term Loan in Montreal
If you’re convinced that a short term loan is the way to go for your expenses in Montreal, you’ve come to the right place. When you apply with us, you’ll be swiftly connected with the right short term loan lenders for your situation. Contact us today!