What Is Closed End Loans?
Closed End Loans; Are you in need of financial support? Are you facing a monetary crunch and unable to pay your regular bills and loan installments? Is it possible that you will struggle to make the future payments of your debts?
In such cases, you can turn to closed end loans to ease the monetary pressure.
A closed end loan is an unsecured form of lending that offers borrowers money without the obligation to pay back all the funds lent out. These loans are typically applied to finance consumer goods or property and are considered as short term loans.
Short term loans provide flexible options to fund your finances, as you can repay the loan within a specific time frame and a predetermined amount. If you fail to meet the agreed deadline, you may be charged late payment fees. You can get this type of loan through banks, financial institutions and online lenders.
However, before availing a loan, it is essential to understand the terms and conditions as they vary from lender to lender.
What are the benefits of a closed end loan?
Closed end loans offer borrowers a convenient way to get funds and help meet the immediate financial needs. As there is no obligation to repay the entire loan, you can take the loan on a long term basis. You don’t have to worry about repayment of the loan.
The amount you can borrow is determined by the lender based on your credit score and income. The lender will then assess the feasibility of funding your loan.
If you cannot repay the loan, it will be transferred to the next borrower.
Closed end loans are ideal for meeting emergency needs, paying for urgent bills and other expenses that may arise unexpectedly.
They are also used to finance home improvement, vehicle purchase, education and medical costs.
What are the risks associated with closed end loans?
It is important to note that closed end loans are not free from risks. Before availing a loan, it is crucial to check the interest rate and the APR (annual percentage rate) to avoid getting trapped into a debt trap.
The higher the interest rate, the more the loan will cost you. You also need to consider the monthly instalments, the loan period and the rate of APR.
The longer you take to repay the loan, the more you will be burdened by debt.
Also, closed end loans are considered risky as the lender has the authority to charge you for defaulting on your payments.
You can use the loan for up to three months or six months. After this period, you will be required to clear the loan on time.
How much can you get in closed end loans?
Most of the closed end loans are based on credit score. This is a good thing as it means that you don’t have to worry about your ability to repay the loan.
Your monthly loan installment may differ from lender to lender. You can avail a fixed rate of interest for a specific period of time or a variable rate of interest.
The amount you can borrow is determined by the lender and can range between £200 and £3
4 Important Reasons Why You Should Avoid Payday Loans
Have you ever thought why people always look for a payday loan instead of a credit card? Why they don’t prefer a secured credit card over the traditional unsecured credit card?
I will try to explain this with the help of an example, which will make the topic easy to understand.
We all know that credit cards are great to use for a holiday, entertainment, grocery bills, and much more. It is easy to get a credit card when you have good credit history but it becomes really hard to avail the same credit when your credit report is bad.
However, there is an alternative option which will make the credit card process very easy, safe, and hassle-free.
This is a loan product that will help you to pay your outstanding bills within a short period of time. It is basically a type of loan in which you borrow money for a certain amount of days and you need to repay the loan within the next 15 days.
So, if you are planning to spend more than $1000 on any of your big expenses, then you can easily opt for a payday loan.
Now, let us discuss the reasons that you shouldn’t opt for a payday loan instead of a credit card.
1. No security: The biggest drawback of a payday loan is that it doesn’t offer any security to the borrower. There is no guarantee that the lender will return your money to you if you fail to pay off the loan. You will lose all your belongings if you don’t pay back the loan.
2. High Interest Rates: There is no doubt that the interest rates are the highest among all the loan products. You will face a higher rate if you compare it with the conventional credit card.
3. Short Term: The main benefit of a credit card is that it offers you a longer repayment term than a payday loan. However, the credit card has a maximum repayment term which is around 15 days.