Suppose your car got crashed or your kid met with an accident. Suddenly you have an unanticipated bill in front of you that you have no clue how you are going to pay. On top of that, you have bad credit and you are in dire need of money. Where would you go? It seems like you’re going to do something difficult or unpleasant and take out a costly payday loan.
But Hey! Stop. You don’t have to take any step which is unpleasant for you. Even though you don’t have a decent credit score, you still have other choices available for you apart from payday loans. You don’t have to take predatory loans like payday loans, cash advance, etc.
Here we are talking about a product that you don’t have to pay in a single instance. You should consider taking an Instalment loan for bad credit from direct lenders instead of taking out a payday loan. Though they are not perfect either, yet they have many benefits compared to payday loans.
The Perils of Payday Loans
There are many ways in which Instalment loans differ from payday loans. One such major difference is the duration of their repayment terms.
As we know payday loans are short duration loans for immediate financial need with average repayment duration of two weeks. Lenders often secure it by a post-dated check or by a commitment from you that lender can debit your account once the loan is due. So, once the due date comes, the full loan amount with the interest charge will get deducted from your account.
It might look a good option for you. All you need to do is just wait for your next salary and you will get rid of the debt. That’s how the payday loan works and became famous.
But the reality is something surprising and different. With a very high rate of interest, payday loans are very expensive compared to conventional loans. Due to this reason, many payday loan borrowers struggle to afford the exorbitant rate of interest and fail to make repayment on time.
And when you are not able to pay your loan on time, it keeps rolling. You have to extend the due date which will bear an additional charge. You might have to consider other loans to finish your earlier one. Moreover, it will impact your credit score as well which is already in a poor state.
This is how you end up stuck in a debt trap. They are continuously adding up new interest charge and making payments that never brings them near to finish what they owe.
The Convenience of Instalment Loans
Instalment loans for bad credits work in a similar way as a traditional personal loan. The only difference is the high rate of interest. The loan generally has repayment duration ranging from six to 36 months and is paid back in a series of smaller payments- on a monthly or bi-weekly schedule.
In the case of a payday loan, there is a limitation on the amount that you can borrow for example 100 pounds. But with this type of loan, you can borrow more amounts. It’s better not to borrow more than you need.
You need to look a lender who provides a lower interest rate for it compared to a payday loan. With this type of loan, every payment you make goes into principal and interest both, which takes you closer to getting out of debt eventually.
One drawback of this loan is you might end up paying more interest charge as compared to payday loans due to the longer duration of Instalment. However, this disadvantage doesn’t mean much because you have the option to pay on a monthly basis so it will not hamper your financial stability.
One more benefit of it is that many lenders send your repayment information to major credit agencies. This means that it can help you in a better and improved credit score if you make the payment on time. And an improved credit record will help you in getting a cheaper loan in the future.
The Best Solution is Savings Not Loan
It might sound confusing to you, but it’s true. If you want to handle an unforeseen expense, the best you can do is be ready for it. You can do so by practicing savings. Put some portion of your income in savings every month and build a stock of emergency fund that you can use in difficult times. This way, you don’t have to take any loan or worry about your credit score.
Hence, we can say that if you choose a bad credit Instalment loan during your financial crisis over payday loans, it could deliver a flexible and manageable payment option and can even boost your credit score.
Description: Instalment loans for bad credit people are very famous loan product available online from direct lenders. It’s a better option when the requirement is more than a few pounds like 400-500 pounds.
