Loan on installments

May 1, 2019 Finance

Loan on installments

The installment loan ideally meets the needs of people who wanted to raise additional funds and repay their liabilities in monthly installments. If you pay in installments of an acceptable amount, you can pay them on time without serious damage to your household budget. Loans on installments are available from banks and lending companies. Loan costs will be higher for loan companies, but this is compensated by a more flexible procedure for granting loans. In this article you will learn about the formalities to be fulfilled in order to obtain a loan, what are the costs and what are the characteristics of monthly installments. We invite you to read it.
Loan on installments
An installment loan is an optimal solution for people who want to repay their financial obligations systematically, every month. It is a much more convenient form of settling liabilities than paying off the entire loan amount immediately, as is the case with instant loans with e.g. 30-day repayment period. The loan installment can be set at such an amount that it does not constitute an excessive burden on the household budget.
You can lose a loan not only in a bank, but also in companies or loan companies. The relatively cheapest form of loan is offered on promotional terms, so called first free moments. If certain conditions are met – mainly timely repayment – these are loans that are completely free of charge. However, in the case of installment loans, the costs are already borne by both loan companies and banks.
Loan instalments
An installment loan is characterised by the fact that we regularly repay it in monthly installments. The loan installments can be decreasing and equal. What is the distinction? In the case of equal instalments, it is clear that we pay the same instalment throughout the life of the loan. The situation is different when we pay decreasing instalments. As the name suggests, this type of instalment is getting smaller and smaller over time. Why is this happening? An instalment consists of a fixed part of the capital and interest. And interest is calculated on the outstanding principal. As time goes by, it gets smaller and smaller, so the amount of the instalment shrinks.
Loan interest rate and other costs
What are the costs of taking out a loan? Interest, which is part of a monthly instalment, has the biggest impact on the cost of a loan. The amount of interest depends on the nominal interest rate. The interest rate is given by banks on an annual basis. It cannot exceed four times the Lombard rate. This rate is set by the office. Of course, the interest rate is not everything we have to take into account when taking out a loan. Both the bank and the loan company will probably also take a commission on granting the loan. A preparatory fee, which can also be an important cost factor, is also possible.
Requirements and formalities
The formalities related to taking out a loan can now be done online. Comfortable, without leaving home, at the computer – this is an ideal opportunity for people who value their time. Of course, you can always approach a bank outlet or a loan company. But it is already an option for amateurs of such a way of dealing with all formalities. In order to obtain a loan, you must first of all fill in an application form in which you will provide our personal data and basic information about employment, earnings, the number of dependants or other financial obligations. The application stage is similar in the case of both loan companies and banks. Differences arise in the requirements that will be imposed on borrowers. Lending companies are more flexible in their approach to assessing the creditworthiness of borrowers. Here, people with low incomes, debts and late repayment of other loans have a chance to borrow. In banks, the bar is set much higher. You have to earn enough money and have a good credit history in the office.
Repayment of the loan
Repayment of a loan in monthly installments seems to be a very convenient and safe solution. However, it may happen that our financial liquidity will be disturbed by some unforeseen expenses and we will run out of funds to cover our financial obligations. What to do in such a situation? First of all, we must be aware that unreliable borrowers may be punished by the bank in such a way that the information about late repayment of the loan will go to the office database. And of course, interest is charged for each day of delay. So it is worth to contact the bank and present the situation. The bank can propose at least a restructuring of the loan in order to reduce the amount of the installment, or will propose a loan holiday.