Installments loans are an important component of the offer of modern loan institutions. In terms of the basic mechanism of operation, installment loans in non-bank companies are very similar to consumer loans available in banks’ offers. This does not mean, however, that there are no significant differences between the two types of loan products.
To what extent are non-bank loans in installments similar to bank loans and in what aspects are they different from the latter? Let’s take a closer look at this issue and try to answer this question.
Non-bank installment loans: basic characteristics
Currently on Polish non-bank installment loans come in two basic variants:
- Loans with monthly installments
- Loans with weekly repayment
The second of these variants obviously comes from the British Isles and is typical for companies originating in the UK.
In terms of the maximum available loan amounts and repayment period, the offer of domestic loan institutions shows a high degree of differentiation. The maximum available installment loan amounts are between $ 25 and 30 thousand. However, there are also offers under which the maximum available loan amount will be only 5,000 USD, which is a typical level for popular payday loans rather than installment loans.
Repayment periods are equally high. The market offers both installment loans with repayments of up to 12 months, as well as installment loans for up to 60 months, which is already approaching the offer of bank loans. More information on installment loans available on the Polish market can be found.
How to choose a good installment loan?
There are three basic factors that should first take into account when comparing different offers:
- Maximum loan amount
- Repayment Period
- Loan costs and monthly installment amount
In particular, the third of these points requires more detailed discussion. Customers are convinced that the actual Annual Interest Rate is a sufficient parameter to compare the financial attractiveness of different offers. In fact, however, the APRC is a highly unreliable parameter, especially when it comes to long-term installment loans . The cost of the loan should in any case mean to us the sum of all fees associated with the loan.
The next issue is the amount of the monthly installment. We often take this factor into account as the most important. This is not always a reasonable approach. As a rule, the loan installment will decrease as the contract period increases. The difference of $ 10 a month in the case of two loans with a repayment period of 30 and 40 months respectively can finally mean the final cost of the loan up to several hundred zlotys.
What other parameters of offers should be considered when choosing an installment loan? Of course, options such as the option of extending or refinancing the loan are important. It may happen that, for example, both offers of interest include the option to extend the contract. In this case, we should compare the allowable extension period (as long as we can extend the loan repayment period) and the amount of commission for extending the contract. Other important factors are the option of loan holidays and the possible existence of loyalty programs in the offer of a given loan company (the latter will be important if we would again want to use a non-bank installment loan in the future),