People take out instalment loans when they need quick cash. Applications can be filled out online, approval is quick, and those who cannot get loans from traditional lenders are often successful. Each lender determines the minimum and maximum amounts to lend, as well as the number of total installments. There is a legal cap on interest rates, but that does vary as well. It is tempting for people to apply for these types of loans, but there are several things to keep in mind before signing a loan agreement.
The first thing to do is compare interest rates and calculate exactly how much the loan is costing in total. The numbers may cause most people to change their minds and find another way out of the financial difficulty. An interest rate of 0.07 % per day does not seem like an excessive amount. Taking a minute to understand what that ends up costing for the duration of the loan is important. A loan in the amount of four-hundred pounds with four payments costs the borrower at total of almost five-hundred and ninety-eight pounds. The annual percentage rate is over two-hundred and fifty-five percent for a total of 113 days. Paying back that much money may just be compounding financial struggles, rather than alleviating them.
Another factor to consider is the high cost of making a late payment, or defaulting on the loan. Late fees, court costs, and any enforcement fees awarded by a judge are added to the total amount of the loan. Those costs can be as high as one-hundred percent of the original amount provided by the lender. Other options can include borrowing the money from a family member, working with a credit counseling agency to ease credit burdens, or planning ahead by saving a little from each paycheck for emergencies. Some people take out short-term installment loans on a regular basis with no problems. It is convenient and qualifications are minimal. There are advantages in certain situations. It is just wise to exhaust all other alternatives before taking out an installment loan. Be sure to understand all the fees, conditions, and terms of the loan before signing an agreement and taking the money.