Personal Installment Loans Often a Lifeline for Those Struggling

personal installment loans a lifeline

Personal installment loans are often a lifesaver for those with financial struggles

Personal installment loans help consumers to avoid lump-sum payments that force many borrowers to renew their loans and fall into debt traps according to a report posted at qz.com. The report examined a report by Joseph Williams. Williams praised the lifeline that payday loans offered while deploring the lump-sum repayment difficulties that can affect even well-educated and high-salaried borrowers.

Payday loan interest rates are high for these short-term loans that only earn interest for about two weeks. People who can’t afford to repay the entire loan balance, fees and interest from their next paychecks often choose to renew their loans, which can result in debt traps. Installment loans online have monthly or biweekly payments for several months, which make the loans easier to budget and repay.

The 2008 recession forced many people with higher incomes to seek small-dollar loans to stay afloat, but even college-educated people could easily fall into a cycle of debt. Interest rates as high as 400 percent APR can easily become unsustainable even for people who earn substantial incomes. Those with large incomes usually have large debts that include mortgage payments for high-value homes, car payments, student loan debts, credit accounts at local retailers and astronomical credit card bills.

How Personal Installment Loans Work for Struggling Borrowers

The 2008 recession forced many people with higher incomes to seek small-dollar loans to stay afloat, but even college-educated people could easily fall into a cycle of debt. Interest rates as high as 400 percent APR can easily become unsustainable even for people who earn substantial incomes. Those with large incomes usually have large debts that include mortgage payments for high-value homes, car payments, student loan debts, credit accounts at local retailers and astronomical credit card bills.

Although personal installment loans are offered by many payday loan companies, these loans are easier to repay because the loan amount is spread over a longer period of time. That won’t solve your problems if you still can’t afford the payments, but for most people, the payments are more affordable. For example, a $500 loan might have $41 biweekly payments for about eight months. There are some downsides–you’ll pay more in interest charges and fees over the life of the loan, but many of these loans have a lower annual percentage rate than short-term loans because the administrative costs are proportionately lower. According to loan.com, the advantages of personal installment loans include:

  • These loans have fixed interest rates and regular payments, which make it easier to work the payments into your budget.
  • Most loans are repaid on a monthly or biweekly basis.
  • Longer repayment terms mean that borrowers get lower payments.
  • Small-dollar personal installment loans usually get a quick approval decision.
  • Military travel loans are available for military families.
  • Larger loans with low interest rates are available for those with higher credit scores or people who can offer collateral.

Gaining Knowledge of Financial Matters Can Improve Your Fiscal Profile

Installment loans online can actually serve as an investment when you use the money to avoid late fees or take advantage of a business opportunity or a rare break to save money on a long-term personal goal. Developing a greater knowledge of budgeting and other financial matters will stand you in good stead to plan responsibly. That’s why understanding the different loan products that are available to someone with your credit score is crucial.

The volatility of investment markets, rising cost of goods and services and economic catastrophes can affect the middle class as greatly as they do the poor. Both classes are subject to layoffs and downsizing when the market for certain products and services declines. Stagnant or declining wages can reduce anyone’s economic power, and even those who budget carefully can fall victim to eroding economic power based on the rising cost of living, debt traps that include credit cards and student loans, higher insurance premiums and financial shocks of unexpected expenses and family emergencies.

That’s why it’s so important to understand your finances, loan options and repayment obligations. A report posted at time.com recommended that consumers learn to think like a CEO, which means considering the economic health of your family and mitigating the obvious financial risks. The recommendations include the following strategies:

  • Sell Yourself
    It’s important to estimate your work value competitively. Many workers deserve higher incomes than they receive. People who feel underpaid should address the issue professionally by preparing sound reasons that explain why they deserve more. Those who are self-employed can raise their rates to increase income but must be careful to overprice their services.
  • Reduce Your Costs and Increase Your Disposable Income
    Use any windfalls to reduce your debt by paying off those loans and credit cards with the highest interest rates. That approach provides you with an increased disposable income as long as you don’t incur more debt. Invest the increased income in an interest-bearing bank account, U.S. Treasury bonds or other low-risk investment so that your windfall generates even more income to offset your expenses. There are other ways to reduce living costs and provide a cushion against emergency expenses. You can consolidate services, create a smart home to reduce utility costs, eliminate things that your family seldom uses and cut costs by clipping coupons and substituting generic products for name brands.
  • Budget Carefully
    Some investments and expenses can generate long-term benefits, so it’s important not to cut all expenses such as those used for education and career development. You should plan your budget based on the payments you need to make to retire any loan product.
  • Research Loans and Credit Offers to Find Better Terms
    Even people with bad credit can usually find a lower interest rate if they investigate multiple lending options. It’s important to read the fine print, find any hidden fees and understand how much your interest rate and fees increase if you make a payment late or miss a payment. If you do find a lower credit card APR, consider transferring the balances of those cards with higher interest rates.

Getting an Installment Loan Avoids Many of the Traps of Balloon Payments

One of the biggest problems that generate debt traps for the unwary is trying to pay off a short-term loan in one payment, but the right type of installment loan can bypass many of the risks. Your financial reality–regardless of your income–might include credit difficulties and too many ongoing obligations for you to afford a lump-sum payment of several hundred dollars–especially if you’re paid each week.

Those consumers with credit difficulties should seek information about personal installment loans first. There are now many alternative direct lenders that offer a range of loan options that include peer-to-peer lending, credit union loans and bank deposit advance lines of credit. Credit card cash advances can also be competitive when compared to interest rates for loans for people with poor or bad credit.

According to a report posted at opploans.com, the wisest strategy for people struggling with monetary problems is to reduce their current debt load, improve their credit ratings, earn more money and reduce routine expenses. Learning more about loans, interest and budgeting can be a big advantage when dealing with unsustainable debts, financial obligations and personal living expenses. The article mentions these financial conditions that can severely test your ability to be financially stable:

  • 30 percent of U.S. consumers have a bad credit rating.
  • About 46 percent of Americans feel “underemployed.
  • 14.5 percent of U.S. residents live below the poverty line.
  • 38 percent of Americans live from paycheck to paycheck.
  • Many borrowers fall victim to predatory lenders or get into debt traps because they can’t repay a large lump-sum payment from a single paycheck.
  • About four out of five payday loan borrowers renew their loans.
  • 25 percent of auto title loan borrowers lose their vehicles, which generates many other financial risks.
  • The average payday borrower stays in debt for about five months.

One study even estimates that those who live paycheck to paycheck is even higher than 38 percent. Consumerbankers.com reports the percentage of those living solely on their next paycheck to be 76 percent of all Americans. The demand for small-dollar loans has never been higher, and deposit advance loans are different from payday and loans that are repaid in installments. These advances from banks can serve as loan alternatives. Only six banks offer these products. Senator Elizabeth Warren endorsed these loans, which are not strictly loans but lines of credit. Warren commented before the House Subcommittee as a special advisor to the Secretary of the Treasury, “Consumers want to know the costs up-front and don’t want to be blindsided by hidden fees, interest rate changes, or payment shocks.”

Transparent lending makes it possible to budget your repayment strategy more strategically by spreading the costs of repaying a small-dollar loan. Given the multiple sources for these loans–which includes banks, payday loan companies, credit unions, community-based lenders and emerging alternative lenders–consumers can find an impressive range of loan amounts, interest rates and financing periods that better match their incomes, debt-to-income ratios and budgets.

 

Installment Loans Online: How to Research Lenders and Loan Products

Finding installment loans online is as easy as finding payday lenders because many payday loan companies now offer these alternative loan products. Traditional lenders also offer installment loans, so it’s important to compare interest rates, repayment periods and other loan fees before signing a contract and finalizing any loan. Your first efforts to research online loan options should include finding out which trade organizations prospected lenders belong to, whether there have been many unresolved consumer complaints

The national organization of payday-type installment loans online is the cfsaa.com, which is dedicated to providing small-dollar loans to consumers from all socioeconomic groups. Many of these companies offer payday loans and installment loans online. More than 19 million people use loan products from the responsible small-dollar lenders that are members of this organization. The organization investigates charges of predatory lending against any of its members and try to ensure that members follow the industry’s best practices, transparent pricing and the highest standards of service.

There are also many alternative lenders of loans that can be repaid in installment, and these include banks, credit unions, community organizations and peer-to-peer lending platforms that allow you to post your loan needs online where everyday investors can look at your profile and contact you if they feel your loan needs are worthwhile.

Learning About Your Finances Is the Key to Staying out of Debt

Regardless of your financial needs, learning about practical ways to stretch your income is the key to greater financial power. The basics of staying out of debt include knowing your assets and obligations, preparing a budget, using tax returns, bonuses and other windfalls to pay down debt and generate more disposable income each month so that you can save money for expensive purchases, down payments, unexpected expenses and as a hedge against losing your job or being laid off for a short time.

One report that applies to businesses also applies to consumers who think like CEOs. A report from americanexpress.com suggests the following tips for staying out of debt:

  • Learn About Different Loan Options
    There are many options for personal loans, business loans and alternative types of financing. You should investigate as many as possible to find a workable solution for your financial profile. There might be times when a payday loan is the best available option because you’re expecting a bonus or have a large income, either of which allows you to retire the debt quickly. If you can’t afford a balloon payment, consider personal installment loans.
  • Plan to Repay Your Loan
    Making a plan to repay your loan is just as important as getting a loan. Many borrowers ignore the former while concentrating on the latter, which is why so many borrowers get trapped in cycles of debt.
  • Plan to Stay out of Debt if Possible
    The easiest loan to repay is one that you never get. It’s important to try to stay out of debt, and that approach should always be uppermost in your mind when budgeting, getting a personal loan or applying for a business loan. Uncontrollable debt can sneak up on you gradually.
  • Make an Emergency Plan for Various Economic Scenarios
    Even the most careful plans can go horribly wrong. You should plan what to do to survive should a financial disaster occur. That includes mitigating risks with insurance coverage, savings, IRAs and other ways to survive hard times. Debt consolidation might also reduce your debts, lower interest rates and monthly payments and simplify your repayment obligations.
  • Research Each Loan and How You Will Repay It
    It’s important to find the lowest rate for a loan, but it’s also important to apply where your application has a reasonable chance of being approved. If traditional loans aren’t available to you because of your credit history, you should first investigate a loan from family, friends, community organizations and your employer. If you choose online installment loans, make sure that you can repay the loan at the appropriate repayment intervals. If you can’t, find some way to increase your earnings during the life of the loan such as part-time job, working longer hours, doing odd jobs, etc.

There are no universal rules that preclude certain types of loans while guaranteeing the value of any others. All loans carry risks. Everything depends on your personal financial profile and your ability to repay the obligation without assuming more debt except in the case of consolidation loans and credit card balance transfers to cards with lower interest rates. Find out more about personal installment loans and alternative installment loan products at the Personal Money Store.

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