Private loan companies operating in the non-banking sector offer their clients two types of loans – short-term and long-term. What are the pros and cons of non-banking financial institutions and is it worth using?
Many of us face a situation where an extra cash injection is necessary. However, not everyone can count on the help of family, friends or a bank. Sometimes, the only way out for people with financial problems is to ask a private loan company for help. We usually associate this solution with high costs – but non-bank loans do not have to be expensive.
We can distinguish loans granted for many months (repaid in installments) and payday loans, which are short-term loans (almost always repaid once with commission and interest due). As it happens in life, every solution has its pros and cons. So what are the pros and cons of the two types of loans?
When analyzing installment loans, their repayment is generally less noticeable for the portfolio due to the nature of the debt – the cost spread over many months does not burden the household budget so much. However, the price for such “luxury” is the total amount we give back to the lender, which can be up to twice the amount borrowed.
On the other hand, there is a much greater risk of falling into a spiral of debts. Not everyone can estimate and plan their income and expenses, which means that sometimes repayment is impossible, and thus the cost of debt increases. However, there is also the bright side of short-term loans, namely the opportunity to take advantage of the promotion of the first free payday loan for new customers.
We can take out a free loan (APRC, i.e. the actual annual interest rate is 0%), provided it is repaid on time – without renewal. This promotion gives you the opportunity to obtain even several interest-free loans (of course in different companies). What’s more, new offers and new loan companies are constantly appearing on the market, which is another opportunity to take advantage of such a promotion.
The choice of loan form should depend on our needs and repayment options. However, no matter what obligations we incur, we must be aware that each debt will have to be repaid, and unfortunately, many borrowers forget about it.