Cash Loans that offer installment repayment plans can be a better solution in a financial emergency than payday loans and vehicle title loans. Payday loans require that the full principal and finance charge be paid back by the customer’s next payday, which can be difficult for many men and women. They have the option to roll the loan over into a new one, but that means another finance charge. Vehicle title loans carry the risk of losing the car if a borrower cannot repay the money.
Payday loans are intended for a very short-term monetary need—typically two weeks or less. Installment loans have significantly longer time frames to pay the money back. The customer might be able to make payments for three, six or twelve months, for example.
Installment loans from online lenders usually have higher interest rates than those from banks, so this is important to keep in mind. Most of their customers are higher-risk borrowers who turn to alternative sources of credit because of problems with their credit history. They may have a low credit score or have not yet built any credit history. The faster they can pay back this loan, the better, as they will save a significant amount of money on finance charges. Even if the payment period is 12 months, paying it back in half that time is advisable.
It’s Time to Start a Budget
Although the person’s financial situation may feel out of control when the need for an emergency loan arises, that money can give this individual the chance to regain control. Once the emergency is resolved, it’s time to sit down and figure out a budget that will work for the household. This may mean eliminating some regular purchases or activities for now, or it could mean finding an additional source of income.
Building or Rebuilding Credit
This also may be a signal that it’s time for the person to take steps to start building or rebuilding credit. Installment loans are not meant to be an ongoing source of financial assistance but rather a strategy to use on rare occasion.