If you’re asking yourself about personal finance, you’ve probably come across this type of loan while researching. It’s not your only option, but it has some major benefits compared to other types of lending.
These days, 43% of us are struggling to pay our bills. The right type of lending can be the support we need through a difficult time.
You need to balance the options and make an informed decision, which is what we’re here to provide in this blog post.
We’ll cover what you need to know about installment loans, and why they might be better than other options.
Installment Loans Give You Breathing Space
With this type of loan, you’ll borrow an amount of money for a long period of time. That can be months.
This gives you room to breathe.
You don’t need to worry about paying off a lump sum soon either. Monthly payments spread out your overall repayment schedule. That’s why they’re called ‘installment loans’.
It’s a real stress-buster to know that you’ve made a sensible plan for your finances.
There’s a lot of flexibility around how much you want to borrow, and how long you want to borrow for.
This makes them a great choice if you have financial needs which other lenders can’t – or don’t want to – meet.
Having low monthly payments also means that you still have spending money. You can still afford to put food on the table, and your life doesn’t grind to a halt.
Missing a payment could still cause problems, but remember that you’re not dealing with a loan shark here. Talking to your lender is the most important course of action you should take.
They don’t want you to be unable to pay at all because they’ll lose the money they lent you. Many lenders are very willing to work with customers to come to new arrangements if the first arrangement fails.
This might cost you more in total. But it could be in exchange for smaller monthly payments over a longer period of time – giving you even greater flexibility month-to-month.
They’re Fast and Easy to Use
Many lenders who offer this type of loan use simple online forms to ask you what you’re after.
You simply put in the amount of money you want to borrow, and fill in a few personal details.
They’ll get back to you quickly with an offer. You can then decide whether that offer is right for you or not
If you accept the offer, in most cases the loan will be in your bank account within days. Lenders who provide installment loans know that you’re in need, so they do everything that they can to speed things up.
Banks Aren’t Always Interested
Banks already have lots of money. If they’re going to lend it out, it needs to be worth it in their eyes, in terms of the money they get back.
This means that they’re not too bothered about lending to people who only want to borrow a small amount.
But perhaps you do only want to borrow a small amount. Let’s say you want to borrow $500 for car repairs.
Banks might not be interested in lending you that amount, as the return wouldn’t be enough to merit the lending. In its view.
Providers of installment loans are willing to lend as little as $100. So they’re likely to say yes to your $500 loan to get your car back on the road.
Plus, they’re even available to people with bad credit. This is a group of people who have had difficulty making payments in the past, which is recorded by credit reference agencies. This means they often struggle when trying to borrow from banks in the future.
This is because when customers take out installment loans, there’s often no need for a credit check.
Find more information here about how they can help you, even if you have black marks on your credit report.
Why Not Use Regular Payday Lending?
Regular payday lending can sometimes work for some people. But lenders will demand payment from your next paycheck. There’s little to no flexibility on that.
There’s also often very little understanding from the lender if you’ve run into an unexpected bump and can’t pay up in full.
So you hand over a big chunk of your paycheque. Or, if you’re experiencing hard times, you borrow from another payday lender to pay the first one off. This creates a vicious circle of debt which can be hard to escape from.
That’s why installment loans can be a better choice for many people. The flexibility they offer means you don’t have a sudden shock when it’s time to pay.
Plus, many installment lenders can actually offer you more than payday lenders. This is because all lending is about risk management, and installments are less risky than payday lending by their nature.
You’re far less likely to miss a smaller monthly payment than you are to miss a large end-of-the-month demand. So they’re willing to lend more on this basis.
Your Financial Future
We hope this article has helped you to understand how a well-managed installment loan can set your path out of debt.
Once you’re out of debt, a good savings buffer can be an effective way to stop yourself falling back into the trap.
Learn how technology can make it easier to save and keep on top of your finances. And find out more about different ways to make money on our blog.
We hope you manage to keep yourself debt-free in the future. But if you do slip into the red, installment loans could be your ticket out of there.