The market for short term loans has transformed quite considerably over the years, meaning that modern day customers of this market are facing a very different service from the past. Nowadays the services offered by short term loan lenders are more flexible and thorough, with the checks they complete taking into account affordability. Instalment loans are becoming more popular with customers as they reflect the changing financial situations that we live in.
What is an instalment loan?
An instalment loan is a short-term loan extended to borrowers. The repayment is carried out over a predetermined amount of time and the loan is paid back in a series of payments or instalments. Loans that fall into this category include car loans and mortgages. Recently, instalment loans have been broadened to include unsecured loans, meaning there’s no collateral like a car or house to secure the loan. You can borrow money similarly to a payday loan, but pay it back in instalments over time.
What makes instalment loans really stand is the fact that they can be renewed every few months. Whilst we live in a world where financial requirements such as paying monthly bills have become necessities, people often find themselves in financial hardship, and as such they need to renew instalment loans.
Key Differences : Payday loans vs. Instalment loans
– Normally paid in full when you get your salary or at the end of 30 days
– Bridge the gap between running out of money and getting your salary and emergency situations
– Smaller amounts of money, from as little as £100, can be borrowed
– Payday loans are unsecured, meaning that the borrower doesn’t have to put up any collateral, such as a car or their home, to get the loan
– High interest rates
-Repaid across a specific period of time, for example over four months
– Any charges that you need to pay are rolled into a monthly repayment
– When a borrower is repaying an Installment loan they usually take longer to clear and therefore seen as more expensive
– With a longer repayment date this might suit some financial circumstances but also could be a hindrance to others
Which loan is right for you?
Whether you are choosing between a payday loan or an instalment loan, it is absolutely crucial to to know the points below and to also shop around for the lender that suits you best.
Know the amount that you need: You might be tempted to borrow more than you need because it is available to you in an instalment loan, but it would be better if you chose a payday loan, especially if it was for a smaller amount such as £100. If you need to borrow a small amount again, then take out that small amount first. This will help you with your own personal financial management, making you a more responsible borrower.
Steady income: You must have a steady income to apply for either loans from responsible lenders, which would allow you to keep up with the repayments every month for an instalment loan.
Have predictable financial behaviour: Taking out either loan requires you to have a predictable finances. Being unpredictable could leave you in a cash crunch, especially if you have repayments to make. This is why having a schedule and being aware of your personal finance management would make it easier.