There are likely very few people reading this that couldn’t do with a little more cash lying around. Whether you’re looking to make a big purchase for something like a house or car, or you need to tap into your savings to help you deal with a minor emergency expense, there’s probably no end to the number of things that you could use this extra money for. The reality is that most of us can’t count ourselves so lucky. If your budget is tight as it is, stacking even minor purchases on top of your usual expenses can be a big strain.If you do run into some kind of financial need and you’re looking for some extra help, there are all sorts of financial products out there that might be able to give you the boost you need. A lot of those products fall under the umbrella of installment loans. Because this is a fairly broad category, there are multiple types of installment loans in Canada that are intended for all sorts of use cases.Just remember that before you even think about applying for one, it’s in your best interest to do the necessary research to understand how they work, what they’re meant for, the different types out there, and if there are other financial products that may be better suited to your needs. With that in mind, let’s dive in and explore some of the details surrounding cash installment loans in more detail.
Defining Installment Loans
To put it in broad terms, if your application is approved for an installment loan, you will receive your funds in a lump sum. The “installment” part of the term comes from the repayment process. To pay off what you owe, you’ll need to make a series of scheduled payments that can span a payment period of a few months or even several years depending on the type of installment loan.
Different loan details (term, amount you’re approved for, etc.) can be impacted by a number of different factors, like:
- What kind of installment loan you’re applying for
- What lender is providing the loan
- How much money you make
- The state of your credit history
Whatever specific details of your loan end up being, when you eventually do pay off what you’ve borrowed, your loan account will be closed. So, if you need more money, you’ll need to start the application process from the beginning.If you’re looking to apply for a loan, make sure that you start by doing some research on what’s offered in your province/territory. For example, if you live in Ontario, do an online search for “installment loans Ontario” to make sure you’re looking at lenders that are licensed to operate in your province.One more important detail of your loan that’s worth noting is whether you’re applying for a secured or unsecured installment loan. This is an important distinction that can heavily impact what’s required to qualify for your loan. With a secured loan, you’ll need to put up collateral of some kind to qualify for approval. The nature of this collateral can vary widely. With an unsecured loan, collateral won’t play a factor, which may mean that the interest rates that you’ll be paying will be higher than they would with a secured loan.The last thing to note is that in terms of the application process, you may be able to apply for installment loans online or in person. Online installment loans
are simply loans that you can apply for over the internet, although there’s a good chance that there’ll still be some in-person or over the phone component to the application process.
3 Types of Personal Installment Loans in Canada
As we already pointed out, “installment loan” is more of an umbrella term that can encompass a number of more specific types of loans. While you can separate these loans in personal installment loans or business loans, our main focus in this list is going to be on the personal end of the spectrum.While there are more types than the three we have below, these are installment loans that are relatively common, some of which you may have already used before. Let’s look a little more closely at what makes each type unique.
1. Short-Term Personal Installment Loans
While each installment loan on this list falls into the category of personal loans
, this specific type is still a little broader than the those that follow. While, in theory, if you’re approved for a short-term installment loan, you’re free to use the money on whatever you’d like, they’re generally meant to help you deal with some type of emergency expense
if your savings are low.Usually, these loans are going to be unsecured, meaning you won’t need to provide collateral to qualify. While you won’t need to risk losing a valuable asset, the interest rates that you’ll come up against will likely be higher than if your loan was secured.Another important thing to point out is that “short-term” in this case refers to the intended use of the product, not the length of the repayment period. So, for example, you may apply for a personal installment loan to help you quickly deal with an emergency expense, but the repayment period may still span several months, or even over a year.
For most people who have bought a home or property of any kind, there’s a relatively high chance that you either have, or have had a mortgage before. The purpose of this loan is to provide people with the money they need to buy a home.
In most cases, a mortgage will require you to put a down payment on the home you’re buying, which is a relatively large portion of the value of the home. From there, the company will provide you with money that fills in the gap between your down payment and the total cost of the home you’re buying. From there, you’ll start to pay off your mortgage over the next several years. The payments that you’ll need to make to pay it off will typically encompass a slice of your principal balance (the actual money that you’ve borrowed and need to repay), insurance, interest, and taxes.Because a mortgage provides you with such a substantial amount of money, most people pay it off over a relatively long period of time. The specific length will vary, but it can take some people up to 40 years to fully pay off their mortgage.Another important thing to keep in mind is that a mortgage is considered to be a secured installment loan. In this case, the collateral you’re putting up is the equity you’ve built up in the home you’re buying.
3. Auto Loans
While the specific purpose is different, in broad terms, an auto loan has a similar outline to a mortgage in that it’s a secured installment loan that’s meant to help you with a specific type of purchase. And like a mortgage, the collateral that you’ll need to put up is your equity in the thing you’re buying.The amount of time it takes to pay an auto loan off can vary, but it’s usually a relatively lengthy term that can range up to a few years. Extending this term can help to lower the amount of your individual payments. Having said that, you may ultimately end up paying more interest with a longer term than you would with a shorter one.
What are the Differences Between Personal Installment Loans and Lines of Credit?
Like we’ve mentioned, there are all sorts of financial products out there that may be able to fulfill your needs, so it’s important to take the time to understand the differences between some of the more common ones. Another common type of personal loan that you may want to explore is a personal line of credit
, but what makes this product different from an installment loan?The first thing that comes to mind is that if you get approved for an installment loan, the interest that you’ll need to pay will start accruing straight from the time you receive your money, and you’ll then need to start paying any fees and interest on the total balance of your loan. With a line of credit, payments on interest aren’t going to start once you’ve been approved for your loan, but will instead start once you’ve requested a draw and received money. On top of that, you’ll only pay interest and/or fees on the amount of money you’ve drawn, not the total amount of your credit limit.
Another important distinction of a line of credit
is that it’s a type of revolving credit
, which means that if you’re approved for one, you’ll generally be able to draw funds on a continuous basis. This makes it a fairly flexible option as you can draw exactly how much you need, as long as you have available credit. You also don’t need to go through an entirely new application process when you need more money.We should also mention that while a line of credit can be a useful tool to have in your back pocket, it’s not necessarily a good thing for everyone to have at their disposal. If you get approved for an installment loan, you won’t have the opportunity to access more credit than you initially had. This can be a good thing for anyone who may be worried about overspending if they were to have access to an open-ended form of credit. On top of this, the scheduled, predictable nature of the repayment process of an installment loan can be helpful to better incorporate your payments into your regular budget.
Learn More About your Options
Whatever the reason may be, at one time or another, you find yourself needing a little extra cash. Maybe you’re trying to make a big purchase, or may you just need a bit of a financial boost to help you out with an emergency. In either case, there may be a personal loan that can help.Just remember that whether you apply for an installment loan, a line of credit, or something else, taking on debt is no small decision. You need to manage your finances accordingly, be responsible, and make sure you’ll be able to pay off what you owe before accepting a loan offer in the first place.