Most readers already have some idea that there are predatory lenders out there whose intention is to trap borrowers in debt cycles, causing them to ruin their credit and endure further financial hardship. Payday loans and title loans are nearly always structured in such a way as to benefit the lender at the borrower’s expense. Installment loans, on the other hand, are generally considered a much safer alternative.
That doesn’t mean that these types of personal loans are right for every borrower, though. Read on to find out about a few questions every reader should ask him or herself before signing on the dotted line for help avoiding predatory lenders.
What is the Term of the Loan?
The loan term refers to the amount of time borrowers have before they must have their loans completely paid off. Installment loans differ from payday loans and title loans in that they can be paid off a little bit at a time instead of in one lump sum, which makes repayment easier for customers who are experiencing financial hardship. They should be sure to ask how long they’ll have to repay their loans, though, as this impacts how large each payment will be.
What are the Interest Rates?
All lenders charge interest to borrowers and usually, the rates being charged are dependent on the borrower’s credit score. The lower the score, the higher the interest readers will pay. While it would be unreasonable to expect a financial institution to lend money with no interest at all, it’s smart to inquire about fees prior to choosing a lender as they can differ greatly.
Are There Prepayment Penalties?
Make sure to find out whether there will be any fees associated with paying the loan off early in advance, as these terms are set in the contract and can’t be changed. The majority of installment loan providers do not charge prepayment penalties. Check out Maxlend Loans to learn about one lender that offers low-interest installment loans to qualified borrowers with no early payment fees.
Are Payments Amortized?
When payments are amortized, that means that each of them goes to pay off both the interest and the principal. It’s important to choose a lender that offers amortized payments, as, without them, payment will go primarily toward the interest and could, theoretically, wind up trapping borrowers with more debt.