Small Dollar Installment Loans
In recent years, Americans have increased the number of requests for small loans. Borrowers take out these small dollar installment loans for a variety of reasons.
Who Borrows and Why?
There are many misconceptions about people who borrow or who take out short-term installment loans. The most common misconception is that only low-income people with no way to meet expenses beyond monthly bills need to resort to using such loans.
Statistics from all around the country show that more than 45 million Americans have access to less than $400 in savings. Many of these borrowers turn to short-term installment loans for quick cash.
Who uses such small dollar loan products, and what do they use the funds for?
According to a report from the Center for Financial Services Innovation: “Small-dollar installment loans address between 50 million and 70 million unserved consumers – those without access to credit cards or mainstream financial products; rely on high-interest loans; or simply have an emergency need for cash.” These loans are often used to cover short-term expenses such as rent, utilities, and groceries.
According to data from the FDIC, about 8% of American adults borrow money regularly just to pay basic living expenses such as rent, utilities, and food. About 21 million others will borrow money at some point during the year just to meet routine expenses not covered by income or other resources.
The majority of these individuals are employed full time and two-thirds are homeowners. But almost one out of every six people who take out small-dollar, short-term installment loans (typically a few hundred dollars for a few months) have incomes of less than $25,000 per year.
In addition to household income, other factors that influence the decision to borrow include employment status and credit history. And while most installment loan borrowers are traditionally young (under the age of 40), older borrowers may also turn to this type of loan when a low income is a major factor in cash flow issues.
Most people who receive these types of loans are lower-income or middle-class individuals who do not qualify for traditional financing sources such as banks.
Consumer installment loan borrowers tend to be men and women with steady incomes who can reasonably afford to repay a small loan within a reasonable time frame without incurring charges for late payments or additional fees.
Most people who choose consumer installment loans do so because they want to save money on interest by borrowing less rather than more.
The Costs of a Small-Dollar Installment Loan
Costs should cover not only the amount borrowed but also any fees that might be charged during repayment. Will you need to pay set-up fees? Are there penalties for late or missed payments? Do you have to repay all interest accrued since the original date of borrowing, as opposed to monthly installments being calculated from the time each payment was made?
When you take out an installment loan, it means that you’re borrowing money that you’ll have to pay back with interest. It’s important for people who take out these types of loans to know how much they’ll have to repay when they borrow a given amount. That’s because, in addition to the finance charges, they may also have to pay a penalty once their loan is due if they don’t have enough money in their checking account to cover the payment.
Installment loans are short-term borrowing opportunities with high costs that can result in long-term financial damage. The high interest rates could lead you into deeper debt especially if you are unable to repay your loan. These loans should be made only when other forms of financing are not available.
The Benefits of a Small-Dollar Installment Loans
Short-term installment loans typically range from about $300-$1,500 with an average term length between three, six, and nine months.
The benefits associated with short-term installment loans are designed for people who have trouble meeting financial obligations when they are due.
Many consumers turn to payday lenders when they don’t have enough money in their checking accounts to cover the cost of a bounced check or insufficient funds fee from an automatic payment, such as a utility bill.
In many cases, installment loans provide people with immediate cash that can help them avoid additional fees and protect their credit ratings.
Another benefit associated with short-term installment loans is flexibility. For example, borrowers looking for a loan may be required to apply along with personal information about their employment status and income.
The lender also determines the maximum amount a person may borrow depending on how much money he or she has available each month after already paying essential expenses like rent or groceries.
Most lenders offer borrowers repayment plans lasting anywhere between three, six, and 9 months, depending on the size of the loan.
People who have been denied loans from traditional sources because of poor credit histories may be able to get approved for a short-term installment loan in an amount they can afford to pay back over time.
Short-term installment loans are also different than traditional payday loans in the sense that borrowers don’t need to repay all their money at once; they can make payments throughout the loan.
Many factors can determine whether or not obtaining an installment loan is right for any particular consumer. MyFundingChoices.com could be a solution to your financial needs. You can apply online, and someone will contact you to let you know if you qualify and for how much. They will thoroughly go over the terms of your agreement.
Only you can decide if this type of loan is right for you.