Best Installment Loans In Canada For May 2024

We reviewed 82 popular lenders based on 17 data points in the categories of loan details, loan costs, eligibility and accessibility, customer experience and the application process. We chose the 10 best lenders based on the weighting assigned to each category:

• Loan details: 20%
• Loan cost: 35%
• Eligibility and accessibility: 20%
• Customer experience: 15%
• Application process: 10%

Within each major category, we also considered several characteristics that would benefit those with bad credit in particular, including awarding an extra five points for lenders offering a low maximum APR, a low minimum credit score, a high maximum loan term and cosigner/borrower capability. Finally, we evaluated each provider’s customer support tools, borrower perks and features that simplify the borrowing process—like prequalification options and mobile apps.

Where appropriate, we awarded partial points depending on how well a lender met each criterion.

An Installment loan is any type of loan that is repaid over a period of time with a scheduled set number of payments. These set payments are often referred to as installments. Installment loans are close-ended loans, which means they have a deadline for when the loan must be paid off. This can be just a couple of months or something more long-term like a 25-year mortgage.

When you are approved for an installment loan, you will receive the entire loan amount at once in a lump sum with the agreement that you will pay it back in full (including interest) based on a predetermined schedule within the agreed-upon time. Again, this can be just a couple of months or over a number of years depending on the loan. Throughout the loan period, you will be required to make regular payments towards your loan. The amount you need to pay in each installment, as well as the regularity with which you need to pay these installments, will also be predetermined. Oftentimes, installment loans come with monthly payments but weekly and bi-weekly options are also usually available as an option. It is also worth noting that in some cases, especially when it comes to mortgages, there are rules about early payments and overpaying may result in being penalized.

The term ‘installment loan’ is pretty general and covers a variety of different types of loans. Here are some of the most common types of installment loans in Canada.

Personal Loans

A personal loan is a general loan that can be used for pretty much whatever you need. Most people take out personal loans for things like home renovations or refurnishing your house. However, you could also use a personal loan to help pay for a wedding, a vacation, or any other expenses. Since a personal loan is given as a lump sum that needs to be paid back in regular intervals over a set period of time, it is classified as an installment loan.

Related: Best Personal Loans In Canada

Auto Loans

An auto loan or car loan is a loan that is specifically meant to be used towards the purchase of a vehicle. Auto loans can be obtained from either the dealership where you buy the vehicle, or from a third-party lender, such as a bank or a credit union. Again, the loan is for a specific amount (the cost of the vehicle) that you borrow in full at the time of approval and need to pay back regularly over an agreed amount period of time, which makes it an installment loan.

Mortgages

A mortgage is the term used for a loan meant to purchase a home. Typically, when buying a home (or other form of real estate) the buyer can only put down some of the total cost of the home and needs to borrow the rest. The amount that they can pay upfront is the down payment, while the remainder that they need to borrow from a lender is the mortgage. The amortization for a mortgage, or the length of time it takes to pay off the loan in full, is typically 25 or 30 years, but regular payments are made in installments over that period of time.

Related: Best Mortgage Rates in Canada

Student Loans

Canada has a variety of funding for post-graduate studies but some students still need to take out a private student loan from a lender, such as a bank, to fund their studies. The amount you can borrow for a student loan will depend on your program and the type of college or university at which you study. Unlike federal student loans, private loans are not interest-free and there is no grace period. Payments, made in regular installments, need to be made as soon as the money is borrowed.

Pros

• Allows you to budget if you know exactly what you are paying and when it is due
• Good opportunity to improve your credit score (assuming you make full and timely payments)
• Most allow you to set your payment schedule (weekly, bi-weekly, monthly etc.) to best suit your needs

Cons

• Interest can add up substantially over time when you pay back a loan slowly
• Some installment loans penalize you with a fee for overpaying your loan before the due date
• If you have a poor credit history, interest rates will likely be quite high

The qualifications required for installment loans depend on the type of loan you are getting. In terms of the examples above, here are the basics of what you can expect to need to qualify for an installment loan in Canada.

• To qualify for a personal loan: You will, at the very least, need to show government-issued ID, proof of income, a home address and a Canadian bank account. Most lenders will also run a credit check.
• To qualify for an auto loan: You will need proof of income, proof of residency, proof of insurance and government-issued ID.you must also be the age of majority in your home province and consent to a credit check.
• To qualify for a mortgage: You will need government-issued ID, proof of income, information on employment, debts and any assets, as well as proof that you can afford the down payment and all associated closing costs. In addition, you will need to have a strong credit score and be able to pass the stress test.
• To qualify for a student loan: Student loan requirements will depend on the lender. There are often specific requirements for being a full-time versus part-time student, the type of post-secondary institution you are attending, as well as your degree and even your age. In addition to this, you will need to demonstrate financial need and prove that you are a citizen or permanent resident of Canada.

Installment loans and payday loans both allow the borrower to receive a lump sum of money upon approval, but the amount you are able to borrow, how you pay it back, and even the qualification and approval process differs.

As discussed above, an installment loan can be for varied amounts of money depending on the type of loan and your needs. Installment loans are paid back in regular, recurring payments over a period of months or years according to your contract. Depending on the type of installment loan, getting approved can also be quite the process.

A payday loan, on the other hand, is a short-term loan. You will be given a lump sum of money and will only have a few weeks to pay it back in its entirety. At least some, if not all, of the loan must be paid back when you receive your next paycheque. You can only borrow a maximum of $1,500 and the interest rates are significantly higher than what you would likely be offered from a traditional installment loan. Due to the high interest rates, payday loans are typically a last resort or emergency option. Keep in mind that you do still need to qualify for a payday loan, however, the process usually just requires proof of income, a Canadian bank account and a home address.

Installment loans, like every other finance product, have their pros and cons. However, for larger life expenses such as car loans, student loans, and especially mortgages, installment loans can be incredibly helpful. While each type of installment loan comes with its own terms and conditions the most important thing is to ensure that you can pay it off in full and on time as per your agreement.

Related: Best Installment Loans For Bad Credit