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Payday Loans, Installment Loans, and Revolving Credit Explained

February 14, 2020 by marvin

At some point in our lives, we all need access to a loan to help with our needs. Three common loan types are payday loans, installment loans, and revolving credit. Keep reading for more information on these types of loans.

What is a Payday Loan?

A payday loan is a short-term loan with a high interest rate. A payday loan is completely repaid in one lump sum on an agreed-upon date, often on the borrower's next payday. A payday loan can be a good choice for a borrower who needs a small amount of cash fast.

For more information on payday loans, click here.

What is an Installment Loan?

An installment loan is a loan that is repaid over a set period of time in regular payments, or installments. The loan terms can be as short as a few months or as long as 30 years, which is often the case with mortgage loans. Once the loan is repaid, the account is closed.

Examples of installment loans:
• Student loans
• Mortgage loans
• Car loans
• Personal loans

For more information on installment loans, click here.

What is Revolving Credit?

Unlike installment loans and payday loans, revolving credit is not issued in a predetermined amount. Revolving credit is a line of credit where the borrower pays a commitment fee to a financial institution to borrow money and is then allowed to use funds as needed. The amount borrowed can fluctuate each month and is often used for business operating expenses. As debts are paid off, the credit is automatically renewed.

The most common form of revolving credit is a credit card. Other examples include home equity lines of credit (HELOCs) and retail cards.

What is Revolving Credit?

February 7, 2020 by marvin

Unlike installment or payday loans, revolving credit is not issued in a predetermined amount. Instead, a borrower is given a limit on how much they are allowed to borrow and it is up to them to determine how much of that amount to use. Generally, borrowers with higher credit scores are allowed higher limits. The most common form of revolving credit is credit cards.

With revolving credit, the borrower makes charges, pays them off, and then continues to make charges within their predetermined limit. As debt is paid off, the predetermined spending limit automatically renews. Minimum payment amounts are required each month.

While balances are allowed to carry over from month to month (as long as the minimum payment has been paid), many financial experts recommend paying off revolving credit monthly. Those who borrow excessively and fail to pay off their balance each month will be forced to pay high interest rates/fees. However, revolving credit can be a valuable tool for those who only charge what they are able to pay off each month. As long as the borrower makes the minimum payment each month, funds are available whenever you want to access them.

Credit cards are a form of unsecured debt. (Read more about unsecured debt here.) With an unsecured debt, lenders can't repossess your property if you fail to repay your debt. However, facility to make at least the minimum monthly payment on a revolving credit can greatly damage your credit.

Types of Revolving Credit

Credit cards
Home equity lines of credit (HELOCs)
Personal lines of credit
Business lines of credit
Margin investment accounts
Deposit accounts with overdraft protection

Advantages of Using Revolving Credit

There are several perks of using revolving credit, specifically credit cards. Generally, credit cars are safer than using cash as spending money. If a card is stolen, you can simply call the lender to have a lock placed on your card and any fraudulent charges refunded. Credit cards are also more convenient than cash when using card readers to make purchases in stores as well as facilitating online transactions, which re impossible to pay with cash. Many credit cards also have reward programs, which can offer cash back, travel points, and other bonuses.

Using revolving credit is an effective way to build up a credit history, which can be valuable to those with little to no credit or bad credit. When you consistently repay revolving credit debt, it demonstrates responsibility and creditworthiness, which are two huge factors in determining your credit score.

Utilizing revolving credit can also be a smart move for people who do not have a regular paycheck, such as freelancers or contract workers. When an income is constantly fluctuating it can be difficult to pay your bills on a set schedule. Revolving credit gives the borrower a chance to pay bills even when their income may not be steady. Just make sure to repay your balance as soon as possible and to make the minimum monthly payment on revolving forms of credit.

When used property, revolving lines of credit can be a great financial tool for many. For more information on various types of loans, click here.

The 3 C’s of Credit and Why They’re Important

January 31, 2020 by marvin

Simply put, your credit score is a tool lenders use to measure the factors that may affect your ability to repay a loan. Your credit score is derived from a complex formula that considers past repayment history, outstanding debt, and your current salary. Your credit score is constantly changing depending on your debt and how you pay your bills.

There are 3 C's that help determine your credit score:

• Character
• Capacity
• Capital

Character

A lender may determine whether you possess the honesty or reliability to repay your debt based on your credit history and whether or not you've repaid past debts. A lender may also consider factors like the length of time you've lived at your present address or the length of time you've been at your current job.

Capacity

Capacity refers to your ability to repay a loan debt. A lender will determine your capacity for loan repayment by considering your current occupation and whether or not it will provide enough income to support your credit use. A lender may consider factors like your current salary, payments on other loans, living expenses, debts, and dependents.

Capital

Capital equals assets. Examples of capital include real estate, personal property, investments, savings, etc. A lender will need to know upfront if you have any valuable assets. Having capital makes you more attractive to a lender because capital can be used to repay your loan debt if your income becomes unavailable.

What is a Payday Loan?

January 24, 2020 by marvin

Payday loans are short-term loans with high interest rates. A payday loan might be a good option for a borrower who needs cash fast. Typically, a payday loan lender advances you a portion of your next paycheck that you pay back when you get your next paycheck. Unlike some other traditional loan types, payday loans are for small amounts of money and are paid back in one lump sum.

More Information About Payday Loans and Debt

There's a lot of information out there about payday loans and debt. We've put together a list of articles to answer some of the questions you might have.

Still need more information? No problem! For more information on payday loans, click here.

Why You Should Get a Payday Loan

January 10, 2020 by marvin

When it comes to income, there are many times when you find yourself short of cash. Whether you have too long between paychecks or simply find yourself in a tough situation, payday loans are a great option. Why exactly should you consider them? These are a few reasons why a person might need to take one.

Problems with a Bank Loan

Although bank loans are often the way to go since they offer lower interest rates, if you have bad credit, you might not qualify for one. If you only need a small loan, a bank loan might not be worth the hassle. Payday loans are usually the better option when you simply need an advance on your upcoming paycheck.

Medical Emergency or Car Repairs

Incidental expenses are usually ones that happen due to unexpected medical or car needs. You may find that when you run into these problems, you need a little more cash than you have on hand. Taking a payday loan lets you resolve these bills with the opportunity to sort out medical expenses or take care of your car and then pay it back over time.

Emergency Money for Friends or Family

If you have a family member or friend who is in a tough spot financially, you may want to help them out. If they don't qualify for any type of loan, you can give them a boost by taking out a small payday loan yourself. You can help them out and then take care of the repayment afterwards.

These are some of the primary reasons why people take out payday loans. They aren't always your best option but they can be a good alternative to borrowing money from friends or family yourself. If you have a job and just need a little help, consider taking out a payday loan to get the cash you need without the hassle of a traditional bank loan.

Personal Loan Types for Your Personal Financial Needs

December 27, 2019 by marvin

There are several common types of personal loans, but which is right for you and your financial needs? We'll review 5 common personal loan types to help you understand which might best suit your needs.

Personal Loan Types for Your Personal Financial Needs

A personal loan is a specified amount of money borrowed at a fixed rate and repaid over a set amount of time. Each type of personal loan has a different set of repayment terms, finance charges, fees, and other terms. It's important to work with your lender to determine which type of personal loan is right for you and your financial needs. Here are 5 of the most common types of personal loans:

Unsecured Personal Loans

Most personal loans are unsecured. An unsecured personal loan is not backed by any form of collateral and approval is typically based on your credit score. This type of loan may have slightly higher annual percentage rates than some other common loan types with rates usually ranging between 5 % to 36 %. Repayment terms can range anywhere from 1 to 7 years.

Secured Personal Loans

Unlike an unsecured personal loan, a secured personal loan is backed by some form of collateral, like your home, car, etc. If the borrower defaults on the loan, the creditor can seize the collateral used on the loan. Since this loan type is considered less risky for the lender, rates are typically lower.

Payday Loans

Payday loans are short-term loans with high interest rates. A payday loan might be a good option for a borrower who needs cash fast. This loan type of unsecured loan, but it is repaid on the borrower's next payday rather than over a period of time. Typically, payday loans are for smaller amounts of cash than an unsecured or secured personal loan. For more information on payday loans, click here.

Installment Loans

Installment loans are another fast cash option for borrowers. Like a payday loan, installment loans are typically small-dollar loans. Unlike payday loans, installment loans are paid back over time in regular installments. Installment loans can be either secured or unsecured depending on the lender and borrower. For more information on installment loans, click here.

Co-Sign Loans

A co-sign loan is for borrowers with bad or no credit scores who otherwise may not qualify for a loan. For this type of loan, the lender uses your co-signers credit score to set the terms of the loan. If you have bad or no credit and are interested in learning more about how to increase your chances of getting a loan, click here.

No matter what your personal financial needs are, there's likely a type of personal loan available for you. Other types of personal loans include debt consolidation loans, personal lines of credit, fixed rate loans, variable rate loans, and more.