Installment loans in Canada

An installment loan is repaid in pieces. You get the money all at once, then pay it back on set dates until the balance reaches zero. That structure separates it from a payday loan, and it shapes the rest: your budget, the contract, and what to do when a payment gets hard.

This guide explains repayment in general terms. Money911 is your co-borrower; a separate lender provides the loan. For the whole path, from request to deposit, see our guide to how fast online loans work.

Installment loan or payday loan

An installment loan (also spelled instalment loan) lets you borrow a fixed amount and pay it back over a set period, in regular payments. The Financial Consumer Agency of Canada (FCAC) notes that lenders also call personal loans instalment loans.

A payday loan works differently. FCAC describes it as a short-term loan with high fees and an expensive way to borrow. You repay some or all of it when your next pay comes in.

What changes for your budget:

• Timing. A payday loan is due, in whole or in part, on your next payday. An installment loan spreads repayment over several dates.
• Size of each payment. Spreading the amount makes each payment smaller than one lump sum. It does not make the loan cheaper by itself.
• Total cost. Compare the credit rate and the total you will repay, not the size of one payment.

Money911 is not a payday lender, and not a lender at all. See our co-borrower service for what we do.

Secured or unsecured?

Loans also differ by what backs them. A secured loan uses an asset, such as a car, as collateral: if you can’t make your payments, the lender may take the asset. An unsecured loan needs no collateral; if you don’t pay, the lender may sue you. FCAC explains both types on its personal loans page.

Co-borrowing is another route. A co-borrower commits to the loan with you, which lowers the lender’s risk. At Money911, that co-borrower is us. The loan itself comes from a separate lender.

Alternatives to a payday loan

Before a payday loan, FCAC suggests looking at other options, such as:

• asking for more time to pay a bill;
• asking your employer for a pay advance;
• getting a loan or line of credit from your financial institution;
• borrowing from family or friends.

Whatever you choose, compare offers on the credit rate and the total you will repay.

The payment schedule

A payment schedule turns one loan into a series of dated payments. According to FCAC, the lender first works out the total cost of the loan, then divides it by the number of payments over the term. That total includes:

• the amount of the loan;
• the interest;
• any other applicable fees.

So each payment repays part of the amount borrowed and part of the charges. In Québec, the amount borrowed plus the credit charges is called your total obligation: everything you will repay.

The number and frequency of payments are set in the lender’s contract. Before you sign, check that each payment date falls after your pay is in your account. On each date, keep enough in the account for the payment.

Will the payments fit your budget?

Before you apply, add up what leaves your account each month: rent, groceries, transport, bills and other debts. The payments have to fit in what remains, with room for surprises.

FCAC gives this advice before any payday loan, and it holds for any loan: make sure you can pay it back on time and still cover your regular expenses. Avoid taking several small loans at once: the payments can outgrow your budget.

On our side, every request is reviewed for your ability to repay; if the risk is too high, it is refused.

Deferring or changing a payment: lender fees

A payment getting hard? Call us before it is due. The lender may change your payment schedule or defer a payment, at its discretion. A deferred payment is not cancelled: it moves to a later date, and you still repay it.

The lender may charge a fee for each of these changes, at its discretion. Ask what it will cost before you agree.

A returned (NSF) payment or a stop payment can also bring fees, at the lender’s discretion. It is also one of the published reasons a request can be refused, and a renewal requires that you have kept to your contract terms. So don’t stop a payment on your own: call us first.

Our FAQ answers other questions about payments and renewals.

Paying early

Want to repay your loan before the end of the term? You can. Call us and we will direct you to the lender, who gives you the payment details for your balance.

In Québec, the Office de la protection du consommateur says you may repay your loan before maturity at any time: you save credit charges, and no penalty may be imposed.

Already a client? You can ask for a renewal once your balance is under $150 and you have kept to your contract terms. It is never guaranteed. See how to renew your loan.

Reading the contract

The applicable terms are in the contract the lender sends you. Read it before you sign: no payment or advance is required at signing.

Take the time to find:

• the amount you borrow;
• the total credit charges, with the interest and any other fees;
• the credit rate;
• the term of the contract;
• your total obligation;
• the date, amount and number of the payments;
• your right to repay early, and what happens if a payment is late.

In Québec, the Office de la protection du consommateur lists what a loan contract must contain. The contract must also mention that you can cancel it on your own within 2 days after you receive your copy.

Is a clause unclear? Call us before you sign. All clear? Send your request online.