An installment loan can be an effective tool you can utilize to build your credit. It can impact the principal factors that affect your credit score and help you manage your finances more efficiently.
Factors That Affect Credit Score
Each credit reporting agency uses their own method for analyzing your credit. However, they generally include the following factors and all can be positively influenced through wise borrowing and installment loan repayment.
An installment loan is one of four forms of credit accounts that credit bureaus assess when they analyze your credit mix. The other forms of credit accounts include mortgages, revolving credit (credit cards) and open accounts for services such as cellphone plans.
You pay an installment loan back through regular payments over a set period. Your payment amount remains the same and once repaid the loan ends. A good example is a car loan.
An installment loan carries substantial weight in your credit mix. If you repay it properly, it shows the credit reporting agencies you can manage various credit accounts responsibly.
This is the most important factor credit agencies consider when they assess your credit. Luckily, an installment loan is also an excellent vehicle for establishing a solid record of repayment.
If you make timely payments and pay your loan in-full, it can help you build a positive credit profile.
An installment loan can also be a great tool to help with debt consolidation. If you have many small bills that you find hard to manage, consolidate them into one payment and better manage your finances.
Taking out an installment loan can increase the length of your credit history. If you’ve only used credit cards or have no credit history at all, repayment of an installment loan can be spread out over months or years.
When choosing an installment loan lender, consider whether they use a hard inquiry when they evaluate your credit. If they do, it can negatively impact your credit score by a few points, even if they don’t grant you a loan.
Fortunately, some lenders use a soft inquiry instead. This doesn’t impact your credit and their qualification criteria may by less stringent too.
Ways to Use an Installment Loan to Build Credit
You have multiple options if you want to use an installment loan to build your credit. These are a few of the most common.
Small Debt Consolidation Loan
If you have balances on several credit cards, consolidate them into a small loan. Make a single, regular monthly payment and pay off the loan according to its terms.
Unlike credit cards, an installment loan does not accumulate interest. Your interest remains fixed throughout the term and every payment reduces your balance.
Borrow, Invest & Repay
Another way to build credit quickly is to take out an installment loan to use for a short-term investment. You will pay interest on the loan and make monthly payments.
However, when your investment matures, you can fully repay your loan at a minimal cost to you. If you invest well, you could even come out ahead. Plus, you will build your payment history, credit mix, and credit history.
Buy a Vehicle Without a Down Payment
If you’re planning to buy a vehicle, you usually need to pay a down payment. If you’d rather keep that money in your savings account or investments, borrow the full amount through an installment loan.
The difference you’ll pay in monthly payments and interest will be nominal. Make prompt payments and you’ll beef up your credit mix and solidify your payment history.
Choose Your Installment Loan Lender Carefully
If your credit isn’t ideal, you can probably still get an installment loan. However, choose wisely. Many charge exorbitant interest rates and high fees if you decide to borrow.
Some Canadian lenders charge up to 47.42% interest. Others charge an origination fee just to set up your account and it is based on a percentage of what you borrow. This percentage can be anywhere between .05% and 8.0% and you should never have to pay it. Still others charge a prepayment fee if you want to make extra payments or pay off your loan early.
Clearly, choosing the wrong installment loan lender could have a negative, not a positive effect, on your credit. You’ll also want to ensure that whichever lender you choose reports to the major credit bureaus. Otherwise, your efforts are wasted.
Why You Should Consider FlexMoney
The Canadian lending market is vast and complex. Unfortunately, many lenders don’t offer great products of service. Here’s why we think you should consider us for your installment loan needs.
No Minimum Credit Score
FlexMoney uses proprietary software to analyze your financial position. We don’t require a certain credit score and we look at much more than your credit file.
According to Equifax, one of two credit bureaus in Canada, most lenders won’t consider applications from those with credit scores below 660. They consider anything below this level a poor or fair risk.
Soft Credit Inquiry
Your application will not impact your credit score. We use a soft inquiry. If you are pre-approved, decide to move forward and sign your loan documents, only then will we start reporting your loan to Canada’s credit bureaus so you can build your credit.
No Origination or Prepayment Fees
FlexMoney does not charge an origination fee for setting up your account. You will receive 100% of your approved loan amount.
We do not charge you prepayment penalties either. Pay extra payments or pay your loan off at any time without paying unnecessary fees.
Competitive Interest Rates
Canadian installment loan lenders can charge as much as 60% interest. Some may entice you with incredibly low interest rates, but these are generally reserved for those with an excellent credit and a long employment history.
FlexMoney offers highly-competitive installment loan interest rates, starting lower than most credit cards which charge 19.99%. If you’re pre-approved, we immediately provide you with our terms. You are under no obligation and your application has zero impact on your credit file.
Quick & Easy Application
FlexMoney operates online. Apply from any device at any time and on any day. You never need to visit an office or provide proof of income. Everything relies on verification through your bank.
Our simple application form usually takes less than 15-minutes to complete. Just have your banking information nearby.
You will need to be a Canadian citizen who is at least 20-years old with a valid email address and a cellphone for identity verification. We also want to see at least three months with the same employer and three months of financial activity with the same bank.
You will need to earn at least $2,000 per month. We will consider pension and self-employed income.
Sorry, We Can’t Help If…
- You are currently enrolled in an active bankruptcy, consumer proposal, or credit counselling program.
- Your income is based on Employment Insurance, the Disability Tax Credit, and government benefits related to COVID-19.
- You supply false information in your application.
Whether you need an installment loan for $500 or $15,000, FlexMoney can help. With terms ranging from 6 to 60 months, you can easily tailor a loan to your needs.
We also offer weekly, bi-weekly, or bi-monthly payments and a handy calculator to help you figure out what works best for your life.
Fast Funds Release
Once you’ve signed your loan documents, you could have money in your bank account within 24 hours.
Great Customer Service
FlexMoney is 100% Canadian. Our customer service representatives live and work here. If you call our 1-888 number, email, or submit a support ticket, you’re dealing with a Canadian.
FlexMoney lends throughout Canada. Visit our website for more information or to start the application process now.