What is an installment loan?
An installment loan is when you receive a lump sum of money and agree to make equal payments over a fixed term. Payments include interest (and fees in some cases) and are usually made once a month. Installment loans differ from credit cards and lines of credit because they have an end date so you know right from the get-go when the loan will be fully repaid.
There are four main types of installment loans:
- Mortgage: Used to purchase property with terms usually lasting 15 or 30 years. You can also choose between a fixed or adjustable interest rate.
- Auto loan: Used to purchase a car. Interest rates for this type of loan generally range between 3% and 15%.
- Student loan: Can cover education expenses and available from the government and private sources.
- Personal loan: Can be put towards any kind of expense and often used to consolidate debt. Personal loans can be secured (backed by collateral) or unsecured (rely on your credit rating).
You can get an installment loan from:
- Traditional banks: This is an excellent place to start if you have good credit. Visit your personal bank first as they may have better interest rates for current customers.
- Credit unions: Credit unions typically offer better rates than traditional banks. Keep in mind you’ll need to become a member of the credit union to take advantage of its products.
- Online lenders: Trusted online lenders may be the best option if your credit isn’t great and you need money quick. You can shop around for the best rates and apply for a loan from the comfort of your home.
What are the benefits of installment loans?
- Predictable monthly payments: Credit cards can be hard to manage as the amount on your statement can change depending on how much you spend. With installment loans, your payments stay the same so you know exactly how much you owe every month. This offers more predictability and makes it easier to budget. Most installment loans also use fixed interest rates which provide peace of mind as you don’t have to worry about the rate increase.
- Flexible payment schedules: Customizable repayment plans give you flexibility and freedom. You can pick a longer term if you want to make lower monthly payments or agree to a shorter period to save on interest.
- Quick access to funds: You’ll most likely need money fast when a financial crisis hits. Lenders understand this which is why funds are normally released within 24 hours or less upon approval.
- Relaxed eligibility requirements: It’s easy to qualify for an installment loan in Canada. You need to be a Canadian resident, at least 18 years of age, possess an active bank account, and have proof of your income, residence, and expenses.
- Credit building: Installment loans can help you build credit if you use them wisely. If your credit is too poor to get a standard personal loan, secured savings loans exist exclusively for credit-building purposes.
How can an installment loan help my credit rating?
Factors that impact your credit score, including payment history (35%), credit mix (10%), and credit utilization (30%)
Installment loans can improve your credit if you:
- Make payments on time: At 35%, payment history has the most significant impact on your credit and most installment loan lenders report this activity to credit bureaus. This means your credit score will increase if you consistently send your payments before the due date.
- Have a healthy combination of debt: The types of accounts (credit mix) you hold play a small part in determining your credit score (10%). If you only have credit cards, adding an installment loan in the mix can help diversify your credit. It also shows you’re a smart borrower as credit cards normally have much higher interest rates than installment loans.
- Keep your credit utilization low: Do you have credit card debt? If so, moving it to an installment loan can benefit your credit rating because it decreases your credit utilization ratio. Credit utilization accounts for 30% of your credit score calculation. A low credit utilization rate indicates you’re responsible with credit and not overspending.
How do I pay off an installment loan?
Flexible repayment schedules are one of the best things about personal installment loans. You can rebuild your credit by paying off a loan in a short amount of time or take up to 60 months if you need it. Once you agree to a repayment plan, it’s important to stick to it as missed payments will negatively impact your credit score.
There are many saving techniques and tools you can use to make sure you never miss a payment:
- Get in the habit of tracking your spending so you can identify areas of improvement.
- Create financial goals and monitor your progress using budgeting apps like Mint, You Need a Budget, and Wally.
- Reduce impulsive credit card purchases by using a cash-only budgeting method like the envelope system.
- Follow the 50/20/30 rule which allocates 50% of your income towards necessities, 20% for financial goals, and 30% for leisure.
- Set up automatic transfers so a portion of your income goes into your savings account every payday.
Can I get an installment loan with no credit check?
It is possible to get an installment loan without a credit check but this route should be avoided at all costs. Lenders who promise guaranteed approval and fail to perform credit checks usually don’t have your best interests at heart. They are known to target people with poor credit and use predatory tactics such as steep borrowing fees and hidden costs to put the borrower at a huge disadvantage.
It’s best to stay away from payday loans too if one of your goals is to build credit. In most cases, payday lenders don’t send your payment history to credit bureaus so the loan will not help your credit rating, even if you make all your payments on time.
Can I get an installment loan with bad credit?
Get an installment loan fast with Fresh Start Finance
From vehicle repairs and medical bills to education expenses and dream vacations, Fresh Start Finance is here to support you at every stage of your life. Unlike predatory online lenders, Fresh Start Finance is committed to helping you improve your credit by providing stress-free installment loans with fixed interest rates and flexible repayment schedules.
What sets Fresh Start Finance apart from other lenders:
- Convenient installment loans: Get approved for loans up to $15,000 without ever having to step in a bank.
- Lightning-fast funding: Apply online in minutes and get funds sent directly to your bank account on the same day or within 24 hours.
- Customizable repayment schedules: Payment plans are flexible with terms between nine to 60 months.
- Credible Canada-wide lender: Fresh Start Finance is trusted by Canadians across the country – just check out the glowing reviews on Trustpilot and Feefo.
- No hidden costs: You never have to worry about hidden costs like application fees or maintenance charges ever.
- No-hassle installment loans for everyone: It doesn’t matter if you’re new to credit or have filed for bankruptcy, Fresh Start Finance says yes when the banks don’t.
What are you waiting for? Get approved for an installment loan today by applying online or calling 1-888-556-6441.