Installment loans are relatively new loan product to the Canadian financial market but looked as it has been designed by the same school of private lenders that offer payday loans to the people often having lower income, less financially literate, struggling with bad debts and or bad credit; it come under same as an unsecured, subprime, high-interest, short-term loans with a twist of flexibility that generally suits most of the people looking for extended terms to pay off the loan over shorter or longer period of time, repayment options and indeed more cash. Installment loans Canada has been getting attraction of more and more lenders to take the place where payday loans have already been established and some of the lenders are setting up their offices or stores in many of the same depressed areas that once used by payday lenders.
Installment loan vs payday loan
Of course installment loans and payday loans are different kind of unsecured personal loans but both carries high interest rates. Unlike payday loans in Canada, which generally offer cash advances for a few hundred dollars like $100 to $1,500 that have to be repaid in next few weeks till payday, where installment loans allow you to borrow money that may be up to $15,000 with an option up to three years of repayment period.
What is installment loan?
According to Wikipedia:
”An installment loan is a loan that is repaid over time with a set number of scheduled payments; normally at least two payments are made towards the loan. The term of loan may be as little as a few months and as long as 30 years. A mortgage, for example, is a type of installment loan.
The term is most strongly associated with traditional consumer loans, originated and serviced locally, and repaid over time by regular payments of principal and interest. These “installment loans” are generally considered to be safe and affordable alternatives to payday and title loans, and to open ended credit such as credit cards.”
Lenders are growing
Business opportunity to lenders seem quite attractive, that’s the reason more and more installment loan lenders are trying to get place in the market, it has already got good popularity in the UK and the USA market that makes not even Canadian lenders but other non-Canadian lending companies are also looking forward to explore more opportunities in Canada. Here is an excerpt from introductory message received through email from one of the lending company ready to begin installment loans Canada:
“To provide a little background, we are one of the largest U.S./UK near prime consumer lenders and plan to expand to Canada in the coming months. We will offer unsecured personal loans between $1,500 and $30,000 for 12 to 48 month terms with APRs starting at 19% and going up to 49%. We are focused on providing our customers an exceptional experience through quick approvals, same day deposits and a large call center staff to help answer questions.”
Intention to invest billions of dollars to offer installment loans Canada by foreign lending company into relatively new market clearly indicate, there is a huge potential for the said loan.
There is no doubt it’s a high interest loan but in presence of Canadian legal restriction on maximum rate of interest on loans do provide protection to the borrowers, remember; anything over 60 per cent is treated as the criminal interest rate in Canada.
Although installment loans Canada is offered to consumers with a poor credit rating but taking these types of loans is not ideal for consumers having poor or bad credit because it will affect a risk factor that will determine your rate of interest over your loan, as high the risk as high rate of interest you will be charged on your instalment loan.
In relation to market critics an installment loans Canada is a new high interest loan for Canadian consumers. According to CBC; instalment loans the new high-interest danger for consumers, installment loans in Canada have been rapidly increasing recently, with a total of $132 billion owed – 8.7 per cent of Canada’s total debt distribution, the majority of which is held by major banks. CBC News investigation reveals true cost of borrowing by interviewing several Canadians with bad credit that have being turned away from banks to other lenders with hope to obtain a loan. According to Equifax, a credit monitoring company, instalment loans are the second fastest growing type of debt in Canada after auto loans.
Other options to installment loans Canada
Most of the people looking for unsecured bad credit personal loans seem really in hurry; all they usually wants quick cash, when they find out they are not qualified for a bank loan, they usually turn toward private lenders that generally charge high rates, getting out of financial trouble is good but if you can’t afford it then you should adopt other options to avoid a debt trap and further problems.
- Try to improve your credit rating to get qualify for a bank loan.
- Always take minimum loan that solve your financial need and you should definitely afford it.
- Consolidating debt is a good idea only if you get it on lower interest rates.
- Better way may be a credit counseling service that can often negotiate a lower interest rate.
If you need long term installment loans, cash loan over a longer period of time or may be looking for short term installment loans with poor credit rating; Installment loans Canada works great if you carefully take it once according to your need, think twice what you can afford, don’t try to roll over and or refinance your loan for more money. Before getting your loan find out exact difference between your loan and your payments to determine your true cost of borrowing.