Instalment loans are usually paid back in small and fixed amounts. Practically, almost any type of loan is an instalment loan. You are not going to buy a house and be expected to pay £150,000 in one go after 25 years. After all, this is the purpose of a loan. You cannot save so much money over a short period of time, so you take it easy – in smaller payments.
Generally speaking, quick loans or payday loans were not designed as instalment loans. Their name is crystal clear. You got so money, then you had to repay it when you got your wages. But then, more and more lenders have changed their rules in order to attract more customers – you can actually get a payday loan and repay it over more than just one month.
Now, what are the benefits of instalment loans?
Flexibility is one of the main benefits of instalment loans. You get a flexible repayment plan that may take a month, two months or even more. Typically, these loans are given over a few months – you will not really need a year to repay £500, will you? Of course, there are various exceptions based on each customer’s situation.
The overall idea is to make the loan more manageable. Sure, you could save up and pay it in one go. But there will always be small issues, unexpected situations or the thought that you can save less this month, as you plan to save more the next month. These issues tend to cause even more debt, hence the necessity of instalment loans.
There are lots of lenders out there, as well as a plethora of special offers and instalment loans. Normally, instalment loans require a monthly payment. It is made on the same day – most commonly, on the day you get paid or just after this day. Are you getting paid weekly? Some lenders allow weekly payments as well, only to make this venture easier to deal with.
It is worth noting that not every lender will accept multiple payments when it comes to repaying the loan. Other than that, some lenders bring in discounts for those who repay their loans faster or stick to the exact same date every month. Make sure you double check the terms and conditions before making a final decision though.
Instalment loans tend to make your life easier. They allow you to manage your finances way easier than normally. The more months you spread your repayments over, the less you will pay on a monthly basis. It is one thing to pay £500 in two months and another thing to pay £500 over five months.
More payments will make budgeting a piece of cake. However, whether you pay a loan over more months or you get more money, the interest rate will increase as well. Basically, the longer your loan goes for, the more you will pay in interest. The monthly payments are great, but the long term expenses will be quite high.
Bottom line, is it worth going for an instalment loan? Absolutely. It depends on what you need the loan for. A payday loan can be repaid in one go once you get paid, but you can also spread it over two or three payments. This way, you reduce the possibility to ask for another payday loan by the end of the month.
Instalment loans are much more efficient than single payments. People simply find it more efficient and easier to budget when they pay small monthly payments. Sure, some may disagree with it, but doing it the other way involves excellent budgeting skills, which not everyone might have.