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Is Interest Higher on Instalment Loans?

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Is Interest Higher on Instalment Loans?

When it comes to saving money, it might seem like taking a loan is the simple solution. You pay off the loan as fast as possible to save money and that's it, right? However, that’s not always the case. Sometimes, minimum payments can actually make you money - a lesson that could make you change the way you think about savings. Today we're going to explore how an instalment loan works, and what sort of interest rate to expect.

What are Instalment loans?

An installment loan is any loan that you pay overtime in more than one payment—for example, car payments, house payments, or personal loan payments. If you pay back a loan in one payment, for example, after 14 days for some payday loans, that’s not an installment loan.

How Do Interest Rates Compare?

For most businesses, the longer you take out a loan for, the more interest you will pay. If you want to borrow $1000 for a week, you’ll pay less in interest than if you were to borrow $1000 for five months.

However, with modern online lenders, this is not the case. What interest rate you are given will be what you pay whether you choose to pay everything back at once or over five monthly payments. However, it’s important to know that actual interest rates will vary based on your personal information and where you live.
instalment-loans

Should You Pay Now or Over Time?

Whether you pay a money lender via installments or one payment will depend on two things - your future money needs and your current money. Depending on what money you have saved, a third role could come into play.

Do You Have Savings?

First, do you have anything saved? If you’re working on a limited budget, then chances are you’ll have to opt to pay back an installment loan as your paycheck comes in. On the other hand, if you have tons of savings, it might not be a bad idea to get everything out of the way.

What Other Bills Do You Have?

If you have a lot of other bills that will be coming up, you might not be able to pay off your loan all at once. However, if this is the only thing that will be worrying you, then you might be able to pay back your loan now with no issues.
short-term-loan

Are You Making Interest?

Finally, are you making interest on your money? This could be through high-yield savings or investment accounts. If you are, then you should look at what interest rate you are making. If the interest rate you are making is higher than the interest rate you are paying, take your time to pay the loan off - you’ll make money in the process! Keep in mind, this is usually the case with longer loans with smaller payments per month.

Need an Installment Loan?

If you need an installment loan, iCASH is here to help. We offer many types of personal and payday loans to those in need. Our automated system will ensure that you get the best offer, no matter your credit score. What’s better - we dont’ change our interest rate whether you want to pay your loan back all at once, or over a period of weeks! Savings score. Contact us today!

Ramona Glanville

Ramona has been a regular contributor to some of Canada's top wealth-management editorials for over 30 years. She strongly believes in good saving habits, reducing financial clutter, and red wine.