Short Term Loans Canada
What You Need to Know About Short Term Loans in Canada
Short Term Loans in Canada
Every now and again life throws us obstacles where a short term loan can provide you with a fast influx of cash. Lend for All works to help you find the right lending partner to get your world back to normal.
Whether there is a great opportunity that come with a cost, or you find yourself facing an emergency, there are options available. Using state of the art technology, you’ll be matched with the perfect lender for your financial reality.
A short term loan is one of the many credit products out there. They come in smaller amounts and are meant for those moments when you need quick money, with terms you can manage.
What is a Short Term Loan Anyway?
A loan is any time a thing (usually money) is borrowed and is expected to be paid back in full, with interest. A short term loan is a specific kind of debt where the amounts tend to be smaller and repayment is made within 24 months, in a standard set of payments.
Most lenders in Canada offer short term loans online or in-person. Once you are approved for a loan, the money is deposited into your account directly, possibly on the same day. You’ll agree to terms that include a set amount to be paid across installments that span an agreed upon timeframe.
To avoid any mistakes when filling out your loan application, make sure you have up to date copies of your work and credit history.
What Are The Types of Short Term Loans?
There are 2 types of short term loans available in Canada. The options are based on the lender you choose and what your financial state allows you to qualify for.
Short Term Installment Loan Explanation
The most common type of short term loan is paid off in regular installments. The total amount of the loan, plus any additional fees, are divided into equal payments you’ll agree to pay at agreed upon times.
Each borrower in Canada has their own standards and restrictions for what budgets feel can afford the short term installment loan. Given you qualify, these are the benefits:
- The installment plan allows for smaller, more affordable payments
- Flexible repayment terms can lead to lower interest rates
- With certain limitations, lenders can adjust your repayment schedule to help make your payments more manageable
Lenders usually offer the following installment periods:
- Monthly (52 payments each year)
- Semi-monthly (24 payments each year)
- Weekly (52 payments each year)
- Bi-weekly (26 payments each year)
- Accelerated Plans (extra or increased payments)
Installment loans are viewed as the safer option when compared against their cousin, payday loans.
Payday Loan Explanation
Most provinces in Canada also offer payday loans, an alternative short term loan product. You’ll apply for this short term loan online or in person and given you’re approved you’ll get a small sum of money deposited directly into your account. In many ways a payday loan is similar to an installment loan, only lenders are offering amounts between $100 – $1,500.
Since the amounts are smaller, you’ll usually receive your funds are far quicker than a standard short term loan. You’ll only need to bring the following documentation:
- Government ID that proves you are above the age of majority in your province
- Proof of an active bank account
- Proof of resident within your province
- A pay stub or other documents that prove income
When dealing with payday loans, it’s key to know your rights and the lender’s legal obligations. Choosing the wrong partner can lead to a bad cycle of increasing debt.
Benefits of a payday loan:
- Accessible loan option that most Canadians qualify for
- The application process does not include any credit checks
- The loan is deposited within 1-2 business days (some lenders promise same day delivery)
- Borrowers with debt problems, low income, bad credit and other significant issues in their financial history tend to have no other short term loan options
It is also worth considering the risks associated with a payday loan:
- Very high interest rates (often $15-$25 on every $100)
- The full loan payment is automatically withdrawn from your account on the chosen dates in most provinces
- Rollover options exist where in lieu of late payments, a second loan may be taken to help with the first creating a cycle
- Payday lenders may engage in predatory practices like extreme rates, scam-like terms and identify theft given they are much harder to regulate
- Missing a single payment can lead to a cycle of increasing debt with increased fees adding stress to your budget
What short term loan option is best?
The short term option that’s right for you is entirely based on your current financial situation. Your income to debt ratio will tell lenders what you can afford and what length your repayment plan should be.
Given your credit is good, your finances are healthy, and you can afford it, the safer and more economic choice is a short term installment loan. These are larger loans, with more favourable terms including more flexibility with regards to missing a payment.
A payday loan is often considered the streamlined option when you need smaller amounts now. This is the riskier option, but you’ll be debt free much faster. Be advised missing a single payment can trap you in a cycle of debt, it’s often chosen after conventional options prove to be off the table.
How to Get a Short Term Loan
Getting approved for a short term loan is a quick and easy process for most people. Lend for All will evaluate your budget and find a lending partner that can give you the best bang for your buck. The main goal is to make sure you can afford to repay your loan on time. As much as possible Canadians are given access to crucial money via short term loans, it’s important that you manage your budget to pay them down. You’ll need to bring along the following:
- Record of your recent income history proving stability (standards decided by each lender)
- Valid Government ID
- Current Address
- Bank statements on your chequing account
What are Some Use Cases for a Short Term Loan?
While everyone has unique reasons for getting a short term loan, there are some common ones where fast money will help. They cover unexpected costs and help you manage when you have no access to other solutions. Below you’ll find a common list of uses for short term loans:
- Hospital Bills and other medical expenses
- Travel opportunities for business or fun
- Work done on the car
- Plumbing, electricians, and other household concerns
- Inflated cell phone bills
Are There Bad Credit Short Term Loans?
You may need a short term loan but be in a position where you have bad credit or your finances aren’t in a healthy state. Thankfully in Canada there are lenders that specialize in clients that need bad credit short term loans, they don’t usually perform credit checks.
The truth is, while bad credit short term loans are an option, the worse your credit score is, the harder this process will be. Good credit tells a lender that you are likely to repay your loan on time, so to compensate you may encounter things like less flexibility in the payment schedule or higher rates.
If you feel your finances are in a bad place, here are some additional documentation you can bring to help secure better terms:
- Bank account details
- Proof of all income sources
- Assets that can be used as collateral
- Cosigner or guarantor to back your loan
Each of these adds credit to the idea you can pay your short term loan according to the repayment schedule. Collateral and cosigners are an amazing way to offset bad credit terms.
What Are the Signs of a Loan Insurance Scam
The sad truth in the world of short term loans, especially among lenders that work with bad credit clients, is predatory and scam-like behavior. You need to research each company and check the reviews to see if they are legitimate.
A common trick played by scammers is to pressure you into paying for “loan insurance” before they can move forward with your application. They know you need a short term loan and rely on the fact you may be desperate.
It is simply illegal to ask for any kind of payment before you’ve received the full deposit of your loan. The application process is typically free and all fees and payments need to be negotiated before you sign anything. It’s a good idea to check with multiple companies so that you can compare the contracts and see if anything is suspicious.
The Pros and Cons of Short Term Loans
There are pros and cons to any financial decision and short term loans are no different. Below you’ll find a break down of the things to consider before taking on this kind of debt:
- Smaller loan sizes makes them easier to pay back in full
- Paying your loan down on time will boost your credit score
- Flexible terms means better financial health equals better rates
- Approval happens within a couple of days with quick delivery
- Helps you manage emergencies and smaller expenses
- Higher interest rates and other potential fees
- Less flexibility in payment schedules with stricter penalties
- Identity theft, predatory rates and scamming unfortunately happen
- If you miss payments or default on the loan your credit will be damaged severely
Will my Credit be Impacted by Applying For a Short Term Loan?
Each time that you apply for a loan, there is a record made in your credit history. Each time an application for a credit product is processed, there is a “hard inquiry” (a request for your credit report), leading to a slight drop in a few points on your credit score. Requesting multiple loans in a short time will have a significant impact.
Once you’ve gotten your loan, paying your installments in a timely manner will have a positive impact on your credit. The opposite is true for your short term loan, if you miss a payment, or are unable to pay it off, your credit score will drop.
Your credit score is a big factor when lenders measure your financial health. It’s used to determine interest rates and other fees. The better your credit score, the better the terms presented by the lender will be.
Are You a Canadian That Needs a Short Term Loan
Lend for All is here to help you find the right partner to get you a short term loan. Reach out to us and we’ll check out your unique circumstances and find you the best rates among local lenders.