A payday loan for a specific purpose
Of the various loan variants, the payday loan is one of the best known. An ideal loan when you know exactly what amount you need. Because you just don’t have the money or because it concerns a large sum like a car. It is also a very clear loan form, because the monthly costs are fixed, so that you will not be faced with any surprises. The lender deposits the entire amount in one go into the bank account so that you can dispose of it immediately.
You repay the same amount to the lender every month. You determine the term in advance and it will continue to apply throughout the entire payment period. If you do not yet know exactly what amount you think you will need, then you should opt for a revolving credit. With this loan the monthly costs can vary, because the interest and the duration can change.
The costs of a revolving loan
The costs of a payday loan consist of a repayment and an interest component. The duration of the loan and the amount that you have borrowed determine the amount of the monthly costs. The longer the loan runs, the larger the repayment portion, while the interest portion becomes smaller. The amount of the monthly costs is determined in advance by the lender.
How much can I borrow?
How much you can borrow will also depend on your personal situation. Consider carefully in advance whether you are able to pay the costs each month and how long it will take to repay the loan. Different lenders have calculation tools to calculate what your monthly costs are. This way you can calculate yourself whether you have enough money left to make ends meet every month. You must keep in mind that the interest that you have to pay for a loan is higher than the interest that you get on savings.
Duration of the loan
You can determine the duration of the loan yourself in advance in consultation with the provider. The longer the period, the lower the monthly charges. That of course seems attractive, but bear in mind that the total costs of the loan with a longer term increase. After all, you pay interest over a longer period. The term for a payday loan can vary from one to fifteen years, but usually ten years. The term you choose may also depend on the reason for taking out the loan. If you want to buy a new washing machine with the money, it is useful to adjust the duration to the life of the appliance. At least you no longer pay for a device that you no longer have.
Some lenders offer the option to repay the loan earlier without penalty. This is not favorable for the provider, because he is therefore missing interest income. Not every payday loan will therefore offer that possibility. Once you have paid the extra repayment, you cannot record it later. This is possible with a revolving credit. So think in advance which loan type you choose.