Until recent times, banking loans and payday loans are differentiated by their installment repayment option. Payday loans were bound to be repaid with their next paycheck, and it created great stress on the budgets of the borrower that likely pushes them into a debt trap. Considering the complexity in handling payday loans available with extremely short tenure that led to a rise in the number of NPAs in the financial industry, the credit union now has introduced installment repayment feature for payday loans.
What Is The Installment Feature?
Any Instant Payday Loans are now available with an installment feature so, they are alternatively termed as installment loans. The installment feature of these loans could be as short as 90 days or pretty long as 365 days. Irrespective of the loan tenure, these loans are fixed-rate loans where the same amount of interest is charged through each month of the loan. Instant Payday Loans with installment features are collateral-free loans as well. It is the lender that determines the eligibility of the borrower for the loan based on their creditworthiness
How Do Installment Loans Work?
When you apply for the loan online stating the required amount, the lender will process the application to check the eligibility based on your creditworthiness and repayment capacity. The first one, creditworthiness, is determined by checking the credit report, and the second one is repayment capacity, considering the current income source, debt-equity ratio.
After the loan amount is approved, you have to pick the loan tenure pertaining to the cap limits of instant cash loans. The loan spread can be anywhere between 90-365 days, and you can pick any, considering your budgetary constraints.
Many installments loans carry a fixed interest rate that is disclosed to you prior to availing the loan. The interest rates in the case of installment loans are displayed on the lender’s website. It is an average rate charged by the lender on the installment loan; the actual rates vary for individuals depending on the loan amount, loan tenure, credit score and repayment capacity.
If you choose to go with a longer tenure of a maximum of a year, the interest rate along with the principal amount will be divided into equal monthly installments. As the interest rate is fixed, there is no change in the monthly installment you pay for the loan. Even for the shorter tenures of 90 days, the process remains the same. As you ought to repay the loan along with interest in just three easy monthly installments, you should check your monthly budgetary constraints before choosing the tenure. Your monthly EMIs may turn big in the case. Choosing the tenure for the loan is left to your absolute discretion; the installment loans offer you the flexibility to spread the emergency expense over months and repay it in comfort.
However, when you choose to go with the installment loan, there might be a certain fee charged by the lender in addition to the interest you pay. You are also bound to bear penalties and another fee. If you delay or miss the payment of any installment. One should examine these charges carefully before they accept the loan offer.
Benefits Of Installment Feature In Instant Payday Loan
The installment option in the case of payday loans turns a big benefit to the borrowers. Apart from standing a flexible option to repay the loan amount, the feature also enables you to borrow more money than a typical payday loan. The repayments of the loan become more manageable than ever in the case of payday loans. As you can repay the loan in smaller amounts each month, you will be better able to meet payments; the lender could allow you to borrow more money compared to earlier.
The beak down option you get for installment feature loans is perfect for payday loans because these loans become a choice during an emergency in most of cases. You can avail the loans immediately without worrying about immediate repayments of the loan.
Drawbacks
There are potential drawbacks to the installment loans. As you repay the loan in the longer term, you may have to pay bigger interest towards the loan. The feature can be quite hefty in the case of banking loans. In the case of Instant Payday Loans, you don’t need to worry much. The amounts you could avail stands to the maximum of $5000 per loan request, and paying the interest for a maximum tenure is not the biggest concern when you all want to is flexibility to repay the loan that you have taken during your emergencies.
