Short-Term Loans Canada

Every now and again, life throws an obstacle 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. 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 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 short-term loan is a specific kind of debt in which 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.

Make sure you have up-to-date copies of your work and credit history to avoid mistakes when filling out your loan application.

Types of Short-Term Loans

There are two 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

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 lending company in Canada has its own standards and restrictions for budgets they believe can work with a short-term installment loan. Benefits of short-term loans:

  • 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 (12 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 to their cousin, payday loans.

Payday Loan

Payday loans, an alternative short-term loan product, are available in most provinces in Canada. You can apply for a payday loan online or in person, and if you’re approved, a small sum of money will be deposited directly into your account. In many ways, a payday loan is similar to an installment loan, but lenders offer amounts between $100 and $1,500.

Since the amounts are smaller, you’ll usually receive your funds 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 of residency 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. In Ontario, payday loan customers have several protections under the law. Lenders must be licensed and display their license, either in-store or online. Borrowers have the right to cancel a payday loan within two business days without penalty. Additionally, fees and interest rates are regulated; for example, lenders cannot charge more than $15 for every $100 borrowed.

In Ontario, payday lenders must be licensed and provide transparent agreements that clearly outline the terms of the loan, including fees and interest rates. They are also required to provide borrowers with a cooling-off period, allowing them to cancel the loan within two days without penalty. Additionally, lenders must adhere to cost limits on borrowing, which cap the fees they can charge to prevent predatory lending.

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 important to consider the risks of 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 where, in lieu of late payments, a second loan may be taken to help with the first, thereby creating a debt cycle.
  • Payday lenders may engage in predatory practices like extreme rates, scam-like terms and identity theft because 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.

If your credit is good, your finances are healthy, and you can afford it, the safer and more economical choice is a short-term installment loan. These are larger loans with more favourable terms, including more flexibility regarding missing a payment.

A payday loan is often considered the streamlined option when you need smaller amounts now. It’s the riskier option, but you’ll be debt-free much faster. Be advised that 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. 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 of 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. :

  • Hospital Bills and other medical expenses
  • Travel 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 have bad credit, or your finances aren’t in a healthy state. Thankfully, in Canada, there are lenders that specialize in clients with bad credit who need 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.

Signs of an Insurance Scam in a Short-term Loan

The sad truth in the world of short-term loans, especially among lenders that work with bad credit clients, is predatory and scam-like behaviour. 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 that you may be desperate. It is  illegal to ask for any kind of payment before you’ve received the full deposit of your loan. The application process is usually 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 breakdown of the things to consider before taking on this kind of debt:

Pros

  • Smaller loan sizes make them easier to pay back in full
  • Paying your loan down on time will boost your credit score
  • Flexible terms mean better financial health equals better rates
  • Approval happens within a couple of days with quick delivery

Cons

  • Higher interest rates and other fees
  • Less flexibility in payment schedules with stricter penalties
  • Identity theft, predatory rates and scamming
  • If you miss payments or default on the loan, your credit will be severely damaged

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 drop of a few points on your credit score. Applying for several loans in a short period will have a significant impact on your score.

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, if you miss a payment or are unable to pay it off, your credit score will drop a lot.

Your credit score is a main 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.

Frequently Asked Questions

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Short Term Loans By Location

Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland & Labrodor, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island, Quebec, Saskatchewan, Yukon