INSTALLMENT LOANS IN ONTARIO

Installment loans are a fast and easy method of getting financing in Ontario, particularly when you need a large sum of money and will need a long amount of time to repay it. You can use an installment loan to cover the cost of personal emergencies such as unexpected medical or dental bills, sudden home or car repairs, overdue utility bills or whether you’re just looking to pay for a vacation or to make large purchases that you cannot immediately afford.

Types Of Installment Loans

Installment loans are a common form of financing in Ontario. There are two main categories – secured and unsecured. Secured loans require collateral, an asset or property as security against the money borrowed. If you fail to pay, the lender can take ownership of the loan’s collateral. Unsecured installment loans do not require collateral.

Some common examples that follow an installment structure include loans for:

  • Autos and trucks
  • Homes
  • Personal
  • Student tuition and housing
  • Debt consolidation
  • Payday loans

HOW INSTALLMENT LOANS WORK IN ONTARIO

An installment loan is any type of financing that you borrow in a lump sum and pay back with fixed payments over a set repayment period which can be weekly, bi-weekly, or monthly payments. These regular, continuous payments are called installments.

The installment payments are paid over a long period of time, ranging anywhere between six months to 35 years. Personal installment loans usually take 12 months and money borrowed for debt consolidation typically takes no more than five years to repay, while the repayment term for a home or mortgage is much longer.

The terms and conditions are typically negotiated with the lender. The principal amount, the interest rate, and the size of your monthly payments are fixed at the start. The total cost of borrowing is largely dependent on:

  • The amount being borrowed,
  • the interest rate charged to the borrower, which is the percentage rate charged on the principal amount
  • Annual Percentage Rate (APR) – Includes the interest expense on the money borrowed plus all fees and other associated costs for processing the loan such as origination fees or broker fees and closing costs.
  • other fees which can include rebates, discount points, early repayment penalties and late repayment fees, and
  • the length or term of the repayment.

With the fixed payment system, you know exactly how much you will owe the lender each month. When you agree on the terms, you’ll get a lump sum amount in cash or you can have the money deposited to your bank account. Once the transfer is complete, you’ll be legally responsible for paying the money back in the agreed amount and time period.

ARE INSTALLMENT LOANS BETTER THAN PAYDAY LOANS?

Installment loans are a great alternative to payday loans as they typically have a lower interest rate and a much longer repayment period. The repayment period for money borrowed on an installment plan can span anywhere between 6 months to 5 years or even longer for certain types such as a mortgage. In contrast, payday loans are traditionally designed to be repaid quickly, usually within a two-week cycle when you receive your next paycheck.

In addition, you’ll need to repay the entire amount borrowed from the payday company in one lump-sum payment in 2 to 4 weeks which can be financially stressful especially for those living paycheck to paycheck. Installment loans are generally considered better than payday advancements as the fixed amount you’re required to pay is much more manageable and affordable for the budget.

There’s also a marked difference in the amount of money borrowed. You can borrow large sums of money under an installment plan. On average, you can borrow up to $1,500 through payday companies, while you can borrow as much $350K with some of the best installment lenders in Canada.

An installment loan can also be a better alternative to credit cards if the interest rate is lower or if the card balance month-to-month is large enough that you find it difficult to keep on top of minimum payments. Some people even turn to installment loans as a form of debt consolidation.

HOW CAN I GET AN INSTALLMENT LOAN WITH BAD CREDIT?

If you have ever been refused a loan or a credit card, declared bankruptcy, or failed to make payments on a debt, or even if you have no credit history, it’s likely you have a bad credit score. A bad credit score is a score of 574 or less and it’s likely that getting approved to borrow money will be a difficult task. However, it’s not impossible as there are still lenders that will consider lending you money with the tradeoff of a higher interest rate on the amount borrowed, and there are also lenders that will consider lending you money without a credit check.

Lenders that offer installment loans for bad credit are perfectly okay with accepting low credit scores. They’ll look at other information instead, such as how much debt you have, your monthly transactions and how much money you make in order to understand your financial behaviour and help qualify you. So long as you’re able to demonstrate that you have the ability to repay the amount borrowed, you can easily qualify for an installment loan without a credit check.

WHAT ARE THE QUALIFICATION REQUIREMENTS FOR AN INSTALLMENT LOAN IN ONTARIO?

Individual requirements will vary by lender, but most lenders will have a few basic requirements to qualify for an installment loan in Ontario.

  • You must be a Canadian citizen or permanent resident with a legitimate Canadian address
  • You must be 18 years old.
  • You must have a baseline income of at least $1,200/month.
  • You must have a credit score requirement of 500+.
  • Most lenders will request for recent pay stubs or bank statements to confirm your income and employment.
  • Most lenders will require an active checking account.

For those with bad credit and have no credit history, you can find alternative lenders that will typically have lower eligibility requirements but will charge higher APRs.

With the explosion of online lending, many lenders have entered the consumer credit market and are offering all kinds of financing methods to qualified borrowers. While having a choice is great, you have to take the time and effort to research potential lenders in your area so you can choose the best one that will work for you and your finances.

SHOULD I TAKE OUT AN INSTALLMENT LOAN TO PAY MY DEBTS?

Many people have taken out an installment loan for the purpose of consolidating their debts, especially high-interest credit card debts. For many people, it works, particularly if the new loan has a more favourable interest rate. There really is no one-size-fits-all solution to debt. The best way to determine if an installment loan is right for you is to assess your current financial situation, your needs, and your goals.

There is a good chance if you are in serious debt and looking to consolidate your debt, especially if some of that is high-interest debt from credit cards or payday advances that there are other debt-relief options that may be more favourable to you.

Contact Richard Killen & Associates for a free consultation and we can help assess your ability and eligibility requirements as well as give you recommendations on how to get favourable terms on installment loans in Ontario.

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Since 1992, Richard Killen & Associates, a Licensed Insolvency Trustee, have helped thousands of people resolve their financial problems. With 25 years experience in this industry, our president, Richard Killen, and the rest of our team understand the difficulties that honest people can sometimes find themselves in. This expertise makes it possible to provide you with a service that effectively deals with the issues.


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