Instalment loans have become an option for people that need cash but cannot pay back the whole amount that he borrowed in a short time. Taking an instalment loan will allow you to make a fixed monthly payment for three years, five years, and even longer depending on the amount that you borrowed and the terms of the loan. Instalment loans do not always involve a cash debt. Car loans and mortgage loans are also a type of instalment loan because you must repay them in fixed monthly instalments until you have paid the principal amount plus interest.
Here are the five top reasons to choose an instalment loan to finance your needs.
Flexible Repayment Period
Unlike other loan products, borrowing on instalment has more flexibility than taking different types of credit. As the term implies, and instalment loan allows the borrower to pay back the amount that he borrowed in several instalments, usually monthly over the agreed number of years. A borrower may choose to repay the loan in 36 monthly instalments or three years, 60 months or five years, or 120 months or ten years.
When you take other short term loans, the lender expects you to settle your debt in three months to six months. For a payday loan, you can only borrow a small amount, which you must disburse lump sum on the next payday. If you need to borrow a significant amount, but you still can afford to pay, an instalment loan will be perfect for you. The principal plus that interest is spread over several months so that you will only pay a small amount on the due date until you have paid your debt in full. However, if you pay back your loan over a short time, the cost of your loan could be lower than paying if for many years.
Predictable Amount to Pay
An instalment loan comes with a fixed amount to pay on a specific date. For example, if you must pay £150 every 10th day of the month, you will pay the same every month until you have paid your debt. Making the timely payment is important to avoid penalties, which can increase the payment due because of late payment charges. If ever you have extra earnings, always allot £150 for your debt and never use the money for other purposes.
Fixed Interest Rate
Lending companies use either a variable interest or a fixed rate. A variable part may change depending on the current bank rates. For example, if the bank rate was 20% when you took the loan, it could go up or down, depending on the interest rate of the banks. If next month, the bank rate is 10%, your amount due could go down. But, if the interest rate is 30%, the amount payable could go up. With a fixed interest rate, you always know how much money to set aside for your debt.
You can pay back an instalment loan for several years. The cost might be higher in the short term, but if you do not have a sure source of cash to pay more than you can afford, the long term repayment scheme could help. Because the lender spreads over several months the amount that you must pay, it would easy for you to manage.
Speedy Processing and Release of Funds
Borrowers who can submit the complete requirements early can get the funds early as well. Approval and release of the loan are for two days to two weeks, depending on the completeness of the documents that you submit to the lender.