The rate at which payday loans and other short term loans have gained popularity has been alarming. There are various reasons why this may be the case; the regular prime-time TV advertisements, the constant media attention and the rising cost of living could all be to blame.
The problem with payday loans
While the majority of customers are able to repay their payday loans on their scheduled repayment date, there is a percentage who fails to do so and allow their loans to rollover. This can cause real problems; the APR of payday loans is extremely high meaning interest will build on the outstanding loan at a rapid rate. Leaving a payday loan unpaid for a few months could result in the total repayment amount being double what you first expected.
Consolidating the debt
In this situation many will turn to credit cards and even multiple payday loans to pay off their outstanding debt; this isn’t a good idea – payday loans are a short term fix to financial problems, what you need in this situation is a long term solution. One particular option in this situation is to apply for an instalment loan.
Using instalment loans
Instalment loan lenders typically offer between £100 and £2,000 which is repayable over a term of 3 months to two years, either in weekly or monthly instalments – depending on the amount borrowed.
One of the most popular uses of instalment loans is payday loan debt consolidation. Often a borrower will have one or more payday loan that is rolling over and accruing interest on a daily basis, by taking out an instalment loan they can then pay off the payday loans, avoid any further interest or late payment charges and consolidate it into one manageable monthly repayment.
Having one monthly repayment is not only much easier to manage, but it is also much easier to budget for. By choosing a lender that offers fixed monthly repayments you can be sure that (providing you keep up with the repayments) your repayments will never change.
But why don’t you just go to your bank?
Well, having multiple payday loans to your name can in fact affect your credit history and show financial instability – and as we know, financial instability is not an attractive trait to prospective lenders. Unlike banks, instalment loan lenders will be able to help regardless of whether you have payday loan debt to your name.
How do I get an instalment loan?
The majority of lenders are now based online meaning there is very little paperwork involved in the process. The fact that the process is very much online-based (and not reliant on the postal service or any other external factors) means that lenders are able to offer a very quick turnaround on the application. Throughout the process there is a good chance the lender will need to contact you so having your phone on you at all times is important in ensuring there are no delays in the process.
Having been approved for your instalment loan it is then vitally important that you keep up with the repayment throughout the loan term; failure to do so could affect your credit history and further reduce your chances of getting low rate credit in the future.