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What kind of loan should you get?
For example, if you’re looking to buy a car, getting a Car Loan is ideal, because of the built-in structure of the loan. It’s a secured loan, but you don’t have to put any other physical asset up as collateral for the loan - the car is its own collateral. Car loans also have way better interest rates than getting an unsecured personal loan, so when it comes to that pesky interest, you’ll do better in the long run.
If you’re looking for a personal installment loan, then your options open up a bit more, especially with all of the alternative lending options available online. If you never want to walk into a bank, or even get on the phone with someone, personal finance companies like Spring can go through the application process in minutes - all by text message.
How are installment loans used?
Installment loans are, generally, larger-sum loans that can either be secured or unsecured and repayment can be spread out over a long period of time. The repayment amount is fixed, as is the interest rate.
These personal loans are usually flexible in nature; borrowers can use them for debt consolidation to help improve their credit, to pay for a vacation, small renovations, helping towards a downpayment on a house, tuition, car repairs, medical bills, or other expenses - you name it! Installment loans are usually big enough to help you fix an existing financial issue or prevent a worse one from building to begin with.
Payday loans are short-term & expensive
Payday loans are the most expensive form of personal financing you can get. With an extremely high APR and less-than 2 week turnaround (in most cases, since repayment is based on your payroll schedule), a lot of people get stuck in the “payday loan repayment trap”. The cost for borrowing from a payday loan company in Canada varies in each province (and, in some, they’re downright illegal). The amount you can borrow is extremely limited and usually only up to $1500 and is based even more on your income than an installment loan would be.
For example, if you’re only making about $2000 a month, payday loan underwriting generally won’t loan you the $1500. If you’re lucky, you’ll get a few hundred.
If your cash-flow was already tight to begin with, paying up to $19 per $100 borrowed (like in Ontario, for example), you may find yourself needing to reborrow just to “fix” the cash flow problem you exacerbated from the first payday loan. And, then, you borrow again, and again, and again.
The cycle is there and hard to break. It’s just not worth it.
What about credit cards?
Credit cards are super easy to use, and, if used correctly, are a great tool to build credit. They’re also generally easy to qualify for.
Credit cards are rotating lines of credit, and while they can be used for anything, the repayment amount is always different every month. On top of that, if you miss (or, are late) on several payments, your interest rate could even go up!
If debt repayment is one of your goals, using credit cards is one of the worst things you could do if you can't pay off your balance every month.
installment loans are often taken out as a form of debt consolidation for credit cards, or when you have too many credit cards and you can’t keep up with the minimum monthly payments, or pay down the principal.
If you need more money, but can’t keep up with your existing credit cards, applying for another one is not a smart move.
Are title loans better than payday loans?
Let’s be frank here; anything is better than a payday loan.
Even the aforementioned credit card is better than a payday loan. Secured title loans are great if you’ve never used credit before, because putting up collateral for a small loan is a great way to quickly establish your credit score.
Unlike payday loans, a secured loan will get you a much lower interest rate, so you can pay it off faster.
The final say: installment loans are better than payday loans
Without a doubt, installment loans are a better form of personal financing than payday loans. With a fixed repayment plan, fixed interest and a longer repayment time (if desired), the chance to improve your credit rating, with the option to put collateral up to boot (to get better interest rates), installment loans are the obvious choice.
Payday loans are one of the most tightly regulated forms of personal financing in Canada, and for good reason! It’s an industry that is considered to be usurious, and needs a lot of government intervention to protect the consumer.
installment loans are a tried-and-true form of financing. Paying off that principal is the most important goal, regardless of the amount you borrow, and getting a payday loan to help is just not the smart way to go.
Get an Installment Loan with Spring
Whether you need a short term loan, or a long term loan, Spring has you covered. Spring offers Installment Loans of up to $35,000 and repayment periods of up to 60 months. Apply today!
