Installment Loans Toronto

Updated on July 17, 2024

What is an installment loan, and how does it work?

An installment loan is simply any loan with a fixed term that is paid back in regular installments, each consisting of a portion of the principal (the original amount of the loan) plus interest.

These loans can be for anywhere from $500 to $35,000 and come with terms from 6 months to 5 years. They’re typically unsecured, so you don’t have to provide collateral.

What can I do with an installment loan?

There aren’t any limitations to what you can use an installment loan. Some of the common uses for a personal loan include:

  • Home repairs or renovations
  • Vehicle repairs
  • Debt consolidation
  • Large purchases
  • Emergency expenses

Even when we budget carefully, unexpected costs can make it necessary to get a loan. Personal installment loans get people the cash they need and pay a fixed amount over a certain period, helping to make these expenses manageable.

What are the requirements to apply for an installment loan in Toronto?

In order to qualify for an installment loan, you’ll have to meet the lender’s criteria. While the details may vary, in general, you’ll have to:

  • be at least 18 years old
  • be a citizen or permanent resident of Canada with a valid permanent address
  • provide proof of income
  • have an active bank account
  • have a credit history

How can I apply for an installment loan?

While applying for a traditional loan through an in-person bank can be a tedious process, with strict standards for approvals and long wait times, it’s simple to find lenders online who process applications quickly and have options for borrowers with less than perfect credit.

You’ll need to provide certain personal information, and lenders will perform a credit check to determine how much they can lend you and what interest rate they’ll charge.

When you fill out your application, be sure to have the following information available:

  • a valid form of ID, such as a driver’s license
  • proof of residency, such as a lease agreement or utility bills
  • proof of employment and income, such as bank statements or a letter from your employer
  • Social Insurance Number

Once you’ve submitted your application, you’ll hear back quickly, often within a few hours, and once you accept a lender’s offer, you can receive your funds within a few days.

How is my credit score affected by getting an installment loan?

Taking out an installment loan can actually help improve your credit score in the long run.

Using a personal loan to consolidate other forms of debt, like credit card debt, can lower your total credit utilization and diversify your credit mix. Lowering your credit utilization to below 30% will improve your score.

Making on-time payments on an installment loan will also improve your credit score. Your payment history comprises 30-35% of your credit score, making loan payments a great way to improve your credit.

While there are benefits to taking out a loan, you’ll only see them if you consistently make your payments in full and on time. Be sure you have the means to repay any loans you take out, or you’ll hurt your credit score rather than improve it.

Can I get an installment loan if I have bad credit?

You can find lenders who will provide you with an installment loan even if your credit isn’t good. Your options will be more limited, and you’ll likely have to pay higher interest rates.

You’ll have a better chance of getting approved if your credit score is above 660. However, there are lenders who will provide a loan even if your credit is bad, and there are also no credit check loans available.

How long are the terms on installment loans?

Term lengths for installment loans vary depending on the amount borrowed and other factors. Borrowers can compare offers from different lenders to determine who can provide a loan that suits their needs.

For example, if you need a small amount of money to cover an emergency expense, you can get a loan with a six-month term. Or, if you want to consolidate a larger amount of debt or make a larger purchase, you can get a bigger loan with a term of five years or more.

Are installment loans secured or unsecured?

A secured loan has collateral that can be repossessed by the lender if the borrower doesn’t repay the loan. Auto loans and mortgages are both secured loans.

Personal loans are typically unsecured, which means that borrowers don’t have to provide any collateral. This also means that creditworthiness and income requirements are generally more strict, and interest rates tend to be higher.

What are the interest rates on installment loans in Toronto?

Canada caps interest rates at 60% for all loans. Lenders base their rates on various factors, including the loan amount and term, as well as the borrower’s credit and income. Their rates can vary from around 3% up to around 50%.

How do I pay off an installment loan?

Lenders may structure their loans in a variety of ways. They usually have a fixed interest rate and a weekly, biweekly, or monthly payment schedule. Borrowers can make payments manually or set up an automatic payment schedule. Most lenders will allow borrowers to make higher payments toward their loan to pay it off faster, but it’s important to make sure that there are no penalties for early repayment.