Are instalment loans meant for those with bad credit a better option than payday loans? They're supposed to be. They do have some important advantages, but you'll still need to know what you're getting. As with any loan, if you don't understand what's involved, you could find yourself with more fees. Instalment loans let borrowers avoid the worst aspects of payday loans but still require careful planning.
Usually Better Terms
Instalment loans offer better terms than payday loans. You can pay off an instalment loan in smaller amounts, rather than needing to come up with the entire loan amount plus interest within a month. And while some payday loan companies understand that you might have to put off repayment and will work with you, their fees can cause the cost of the loan to skyrocket quickly. If you've offered anything as collateral for a payday loan, you risk losing it rapidly. Smaller instalment loans for people with bad credit are configured specifically to avoid this problem. If the loan you take out is through a reputable lender who verifies that you can handle the loan, then paying it back over a series of months shouldn't be an issue.
Watch Out for Interest Rates and Fees
You should still look out for interest rates and fees with these instalment loans. These will vary by lender, so you do need to comparison-shop to the best of your ability. It might not seem like you have many options, but you do. Ensure the interest rate is capped so that it doesn't go over a specific percentage. Fees can include an initial fee, late fees, text message fees and more. Not every lender will impose these fees or make the fees huge. Look at the total amount you'd end up paying back over the life of the loan to see how each lender's policies would work for you.
They'll Do a Credit Inquiry
One of the advantages of many payday loans is that they don't rely on credit checks, so people with bad credit tend to gravitate toward these fast payouts. An instalment loan for people with bad credit will require a credit check. However, because the loans are meant for people in situations where their credit might be quite low, having bad credit itself isn't a disqualifier.
In fact, depending on why you have the bad credit, it could give the lender a better idea of why you need to loan, and in some ways, that can be very helpful. For example, if you can show that your history of late payments is because the late fees from one round of late payments eat up your income, making it harder to have money to pay upcoming bills on time, and if you could just get a loan to pay bills ahead a bit to stop the cycle of late fees and reset your budget, the lender might not hold that history of late payments against you.
Speak with lenders about these instalment loans and see what you and they can work out given your situation and reasons for wanting the loan. These lenders want to both help you and get their money back, so look for those who will sit with you and work out in detail how you'd be able to pay back the loan. Get a repayment schedule that fits easily into your budget. For more information, contact an institution that offers things like cash loans and fast approval.