Installment loans are generally safer than standard payday loans because you can usually take up to several months to repay as opposed to having to repay on your very next pay cheque.
Is An Instalment Loan Right For You?
Traditionally, instalment loans have been harder to get than other fast credit products such as payday loans. In fact people with less than perfect credit would accomplish little more than than wasting their time by applying for loans that had more than one or two installments. Over the past few years, short term credit companies have been pressured into offering loans with more payment options
One of the main reasons that installment loans have been harder to get in the past was purely profit based. The short term loan companies knew they could easily get people who were in desperate need to apply for almost anything because they just needed money fast. This worked out great for the lender. The loans were for a period of as little as two weeks and for a maximum of one month. This allowed the lenders capital to be tied up for only a very short period of time and increased profit margins by huge amounts. It did, unfortunately, cause many people to fall into a debt cycle that was very hard to overcome.
When someone with poor credit applied for any type of loan that had decent payment terms, often their only choice would be the major banks which had very demanding requirements. that were difficult for many people to meet. One of the main considerations in traditional bank lending is credit history. This one requirement automatically ruled out about fifty percent of the people applying. Other issues people faced with traditional bank loans was having to show a long employment history, personal references and even be able to provide physical collateral. Obtaining credit at banks quickly became an exercise in futility for many customers.
Government Regualtions and Public Outcry
Thanks to both public and governmental pressure things began to change a few years ago in the loan industry. People who had previously only been able to apply for short term, high interest loans were beginning to see more options that could help them. Government regulation began to be implemented that helped prevent predatory lending that was causing more harm to people. Many price caps and other consumer protections were put into place. This forced short term lenders to extend the length of time that they allowed borrowers to to repay their loans. This turned out to be beneficial to both the lender and the borrower because default rates went down and profits remained steady.