Installment loans are a proper and important response to payday loans. Payday loans ask too much. They are too loaded with fees that are unavoidable. The idea of emptying the next whole paycheck in a loan is absurd and short-sighted for no one has a paycheck to spare. It is a system designed to ensnare people who are not aware of what they are getting into. Payday loans have their use, but they are not useful for most people.
With that said, short-term installment loans carry all the best features of payday loans without the lump sum repayment. So, what is the catch? In the world of borrowing, there is always something to keep a close eye on.
Firstly, the loans do have higher rates than bank loans. These rates must be accounted for in the total repayment of the loan to avoid an unpredictable hole of borrowing and spending. The rates make sense due to the lack of any collateral. Installment loans from Blue Trust do not require collateral in any way. Even pawn shops require collateral in the form of something with inherent value. These loans do not, so the risk is increased.
How to Respond to Higher-Than-Usual Rates
Though it is true that short-term installment loans typically have higher interest rates compared to commercial and bank loans, not all is lost. A borrower can pay every payment on time and even early to cut back on any fees. The fees become exorbitant if they are paid late. It has to be that way to deter late payments, earn payments on time, and keep the borrowing system viral for new potential borrowers. Thankfully, installment loans can be paid off early to stave off fees.
The rates are not any higher than in payday loans, and most installment loans are lower. Due to the nature of the lump-sum payment and the short turnaround, payday loan providers are forced to offer exuberant fees. Installment loan providers are more practical. Due to the structure of the loan, they also get paid off more often. Payday loan providers get hit far more frequently with non-payment and late payments. This should not be a surprise. The providers are asking their borrowers to hold off a paycheck.