There are now different options for anyone with a bad credit record or who wants a quick loan, with regards to short term loans. The option used to be just a payday loan which had to be repaid in one instalment on the person’s payday. However, there is now the option of a loan that can be paid back in instalments and this can have a lot of advantages over the traditional payday loan. It can be worth finding out more about both types and thinking about which could be the most useful for you. Consider the following things:
The cost of a loan normally will increase the longer you have the money. This means that if you borrow money for just a few weeks and pay it back in a lump sum, which is what tends to happen with a payday loan, then the interest will be kept to a minimum. However, if you repay over a number of months, then you will owe the money for longer and it will be more expensive. There may be exceptions to this as all lenders have different rates and ways of charging, however normally this will be the case. This means that you might think that going for a lump sum repayment will be the obvious option as it will be cheaper. However, it is worth thinking beyond this and imagining hat might happen to the cost if you cannot afford to repay.
Ease of Repayment
If you have just one lump sum repayment, then you will have to find a big chunk of money to pay in one go. If you spread the repayments over more than one month, then you will find it easier to manage the cost of the repayments. This is important because of the cost of missing a repayment.
A missed repayment can cost a significant amount of money. It is good to take a look at the terms of the loans that you are considering to find out how much this will be. Although payday loans are now regulated and the amount that they can charge is capped, it can still be a significant chunk of money. You are much more likely to not be able to able to afford a repayment if it is a lump sum compared to smaller regular amounts. Therefore if there is a risk of you not paying the loan back in full when required, it could end up costing you more money, than it would had you gone for the dearer loan that allows regular repayment.
You may find it easier to manage your other expenses as well if the loan is repaid in smaller amounts over a longer term. If you have to repay one big chunk, then you could find that you will have no money to cover the cost of your other monthly expenses and could struggle to find what you need towards the end of the month. This could mean that you end up having to borrow more money to be able to buy food and then that will cost you again. If you can spread the payments it should be easier to manage and then you will be able to avoid having to borrow again.
However, you may find that having a loan hanging around for a long time wil make you feel stressed. You may worry about owing the money and just want to get rid of it as soon as possible. In this case, it could be better for your health to get it paid back as soon as possible. In this situation though, you will need to make sure that you budget really well to ensure that you can manage with less money so that you do not have to borrow again due to not having enough left by the end of the month. It can be wise to think about what you might be able to do to make it easier for you to manage. You may be able to cut back spending in some areas, sell things to make extra money or fid additional sources of income. This will not be as easy as it sounds, but if you concentrate and spend time thinking about it, hopefully you will be able to find a solution that works for you and fits around your life.