I need to take out a short-term loan. What are my options?
With inflation at 7.6 per cent, many Canadians are turning to short-term loans to pay for necessities. Experts point out several options.
If high inflation is squeezing your budget, you aren’t alone. A recent survey by Finder found that 36 per cent of Canadian consumers said their main reason for taking out a loan is to cover bills for rent, mortgage, food and transportation.
With inflation at 7.6 per cent, many Canadians are turning to loans to pay for necessities. If you’re in this boat, experts say there are several options.
Short-term loan ratesHere are some personal loans available in Canada based on eligibility. See the providers’ respective websites for the fine print.
Jason Heath, a certified financial planner at Objective Financial Partners, recommends Canadians explore zero- to low-interest options first. One of those is to seek the help of friends or family temporarily.
“That can be an option that sometimes will be interest-free, but the drawback is if you borrow money that you’re not able to pay back to a friend or family member, it could put that relationship at risk,” warns Heath.
Or you could consider an introductory offer for a credit card that offers zero interest for a certain period, often 12 months. “The risk, of course, is you’re adding a new credit card, so you will have to pay it off before the interest rate rises, and sometimes, that’s how people end up with lingering credit card balances,” says Heath
Another option, if you own a home with any equity in it, is getting a secured line of credit, says Derek Moran, head of Smarter Financial Planning. “It’s something you can use over and over as you need for temporary things here and there — it’s kind of like a big emergency fund,” he says.
Heath and Moran agree that high-interest loans, such as payday loans, should be one of the last options to consider. While it’s easy to borrow that kind of money, the interest rate is high because it has to be worth the risk for lenders not to look too closely at your overall financial situation.
Heath cautions that short-term borrowing can come at a steep cost. It can lead into more financial difficulty and that can lead to a bigger problem, such as bankruptcy, says Heath.
“Things happen, life happens, but it’s important to try to avoid those types of debt to the extent you can.”