If you’re thinking of taking out an installment loan then there are some things you should first consider, especially if you’re a novice. You’re likely going to end up paying more back than what you borrowed, commit to a payback period that’s unmanageable, and further harm your credit score in the process. Knowing what to look for in a reasonable loan can save you money and stop you from committing to something that will harm you further financially. There are several leading sites that compare the best installment loans so you can easily pick one that works for you.
Though it’s probably something we’ve all tried, what with all the money-managing apps and forums available, budgeting is the best way to save money. It might not be able to get you out of this particular financial bind but it’s a plan that’ll rescue you in the long term. For those that can, reducing spending on items you don’t need and limiting your budget on grocery shopping are just a couple of ways to keep the pennies in your pocket, rather than elsewhere.
Late Payment Penalties
Of course, when taking out a loan, there are stipulations that could see you paying even more, like late payment penalties. On top of the already high rate of interest, if you find yourself unable to make a certain payment, the lender is able to charge you a fee that they determine. Depending on the company, these fees could go from being a minor one-off payment to a recurring charge, growing each day that payment hasn’t been received.
Credit Score Impacts Interest Rates
People that live paycheck to paycheck probably don’t have the best credit score. Most banks and lenders will determine interest on a loan based on a person’s credit score, so if yours isn’t looking too good, you’ll probably pay even more on interest. If you’re fixed on taking out an installment loan, make sure to see what lenders are available, how they determine their interest, and how much you’ll end up paying.
Borrowing From Friends and Family
You should always consider asking friends and family before selecting a loan from a random lender online. Anyone who has the opportunity to avoid owing banks and paying interest on their loan should definitely take it. You’ll likely have to commit to an undesirable repayment plan and pay a large amount of interest if you take an installment account. A no-pressure loan from a friend or family member will come with better terms for paying it back and probably won’t come with interest.
Bigger Initial Payments Saves Money
Some lenders will allow you to save on interest rates by making larger payments in the beginning. Whether it’s part of your agreement with the lender or it’s a part of their terms, it’s certainly worth it if you can afford it. Agreeing to this with your lender could shorten the repayment plan and help you save on interest.
Lenders Don’t Lend Sensibly
People that need to make a quick buck are turning to loans as a way to get cash fast. This is quite dangerous, however, as there’s no law that requires these companies to ensure the money can be paid back. Instead, they can lend to whoever they want and make even more money from late repayments, hiked interest rates, and more. Never take a loan if you know you won’t be able to pay it back.