loan repayment

In 2020, the average debt in Canada rose by 2.7% to reach a whopping $72,950.

Loans are becoming more and more common across Canada, and for good reason, too! They’re a great way to ease financial stress and help you with short-term money struggles. But loan repayment isn’t always easy. 

If you think you’ll struggle to repay your loan, there are options to make it easier, and one of the most popular is renewing your loan. But what is it, and is it the right option for you?

Take a look through our guide to find out everything you need to know. 

What Is Loan Renewal?

Loan renewals are often used by small businesses, but they can also be used for personal finances. The basic idea is that you take out a loan — be it through online loans or from another lender — you pay it back, and then you take out another one. It’s completely legal and has been used by people across the world for years. 

This tactic can work for payday loans, fast loans, and even quick, no credit score loans.  But what are the benefits? Let’s take a look.

Easier Loan Repayment

The first bonus of loan renewal is that it makes loan repayment a whole lot easier. Let’s say you don’t need all the money you’re looking to take out straight away. You’re going to need $10,000 over the next year, but you don’t need it all right this second. 

By taking out $5,000 now and $5,000 later, you can make your loan repayments much less daunting. Rather than having to pay the repayment and interest of $10,000 over six months, you can pay the repayment and interest of $5,000 in the same time frame. Once that’s paid off, you can take out the next loan. 

The monthly payments on your loan are spread out over a longer period of time, making them smaller and more manageable. If you’re worried you won’t be able to afford the monthly repayment, it’s a great way to reduce your stress. 

Avoid Loan Limits

When your first take out cash loans, it’s likely you’ll have a limit. This could be based on factors such as your credit score, your employment status, and your annual salary. The lender will work out how much they think you can afford to pay back from these factors.

However, much of the time, your limit is less than what you need. If this is the case, loan repayment is a great way to increase that limit and get the amount of money you need, just over a longer period of time. Whilst it might not be ideal, it’s a better solution than no money at all!

Better Rates and Repayment Terms

After you’ve taken out your first loan, you’ve started to build a relationship with your lender. If you’re on time with your monthly repayments and pay back your loan as you should — or even early — you’ll be showing your lender that they can trust you.

When you go back to renew your loan, because they know who you are and that you’re reliable, they may also give you better rates and repayment terms. You might be able to take out a bigger loan, and your limit will be increased. They could also decrease your interest rate or give your more favorable repayment terms, extending the time you have to pay it back by. 

Is It the Right Option for You?

Loan renewal has tons of benefits, but it isn’t the right option for everyone. If you’re unsure, here are some ways to tell if you need a loan renewal:

  • You don’t deal well with financial stress and large repayments
  • You have a lot of expenses and don’t want to add a large monthly repayment
  • You don’t have a good credit score
  • You don’t have the collateral to put up for a larger loan
  • You don’t need 100% of the money straight away and would prefer a longer repayment plan
  • You’re not sure you will ever need 100% of the amount 

Loan renewals are usually uncomplicated, but you should remember that with your renewal, just because your loan limit may have increased doesn’t mean you have to take it all out! Stay sensible and only ask for what you need to avoid repayment stress.

Other Tips for Paying Off Debt

Loan repayment doesn’t have to cause you stress. There are ways you can make it easier. Here are some helpful tips:

  • Set up a monthly direct debit on payday, so the money goes straight out of your bank and to your lender
  • Keep a savings account to add leftover money to after your monthly expenses to save ahead for repayment
  • Create a budget that accounts for your monthly repayment
  • Look at personalized budget tips like this article for single parents
  • Cut back on luxuries like eating out and expensive coffee to pay your debt
  • Let your friends and family know you’re saving for repayment, so they don’t plan expensive outings

If you’re struggling with repayments, there’s plenty of advice out there that can help you, so make sure you look!

Get a Loan Renewal

If you’re looking for a lender that offers loan renewal, look no further than Captain Cash. We offer fast loans, and our renewal service makes your loan repayment easier than ever! Find out how to apply for your loan and start living the life you want today.

If you have more questions about our loan services or would like advice on repaying your debt, be sure to get in touch with our team. We’re always happy to help!