Almost four in 10 Americans — that’s how many US adults would have a hard time covering a sudden $400 expense.
If that bill goes up to $1,000, only 40% of adults would be able to shoulder it with their own money.
So, what about the rest? 16% said they’d put a $400 expense on their card, while 10% would borrow money from friends or family. A total of 5% would get a loan, either from a bank or a payday lender.
If you find yourself in this situation, know that bank or payday loans aren’t your only option. There are also installment loans that can help tide you over until your finances are a bit better.
The question now is, what is an installment loan and how exactly does it work and differ from payday loans? Is it a good choice and if so, how can you secure one in Kansas City, KS or Kansas City, MO?
We’ll answer all these questions in this post, so be sure to keep reading!
A 100-Word Primer on Installment Loans
An installment loan is a fixed-amount, lump-sum loan that has a fixed repayment period. You’ll make several repayments towards the loan over this agreed-upon period. Each of these payments is an installment, hence the term “installment loan”.
By that definition, mortgages and car loans are also types of installment loans.
The loan repayments already include a portion of the principal and interest. What’s more, reputable KCK and KCMO lenders allow you to set an easy repayment schedule. Depending on what you’re most comfortable with, you can make payments twice a week, twice a month, or once a month.
Regardless of which payment schedule you choose, you’ll have a fixed payment amount. Meaning, you don’t have to worry about sudden increases, so long as you pay on time. If your first payment is $50, then all the other payments you’ll make will also be $50.
How an Installment Loan Works
Let’s say you need to borrow $500 (principal) and pay it back over a period of three months (loan term). Let’s also say that the lender will charge a monthly interest rate of 30%. Think of the interest rate as their “service fee” or compensation for letting you borrow money.
The lender will then divide the $500 into three (months), so you’ll pay $166.67 toward the principal alone. They’ll apply the 30% interest rate on that, so your monthly interest payment will be $50. Adding the two together, your total monthly loan repayment will be $216.67.
If you schedule a once-a-month payment, you’ll pay $216.67 once a month, for three months. You may find it easier to make smaller repayments, so you can also schedule repayment of $108.33 every two weeks.
Note that this is only an example, and that interest rates still vary. Don’t worry though, as reputable lenders are transparent about their rates. They don’t have “hidden” costs, as they put all the details of their services into writing.
Installment Loan vs Payday Loan
Personal installment loans, like payday loans, give you quick access to cash. If you get approved, you can have the money within the same day you apply for the loan.
Payday loans, however, usually need to be repaid by the time you get your next “paycheck”, hence the term “payday”. So, they have a much shorter repayment term, typically within two weeks or a month. This is also why payday loans have smaller loan amounts.
In Kansas City, KS and surrounding areas, lenders can only legally issue up to $500 for a payday loan. The same goes for Missouri payday lenders, including those operating within KSMO.
With an installment loan, however, you can borrow more money since you can pay it back over the course of a few months. And because it’s a longer-term loan than a payday loan, you may be able to secure a lower interest rate.
If You Need More Money than a Payday Loan Could Provide
Payday loans, although helpful, could be too small to cover your needs, with their cap set at $500. This surely won’t be enough to cover sudden home repairs like a leaky roof, which in Kansas City, could cost up to $850!
Medical emergencies are even more expensive, with the average ER bill in 2017 amounting to $1,389. That doesn’t even include prescription medications and other hospital fees.
In such cases, a personal installment loan may be a better choice than a payday loan. After all, reliable installment loan lenders in KSK, KSMO, and surrounding areas let you borrow up to $2,000.
If You’re More Comfortable Spreading Loan Repayments over a Few Months
Even if you need a loan smaller than $2,000, it may still be better to opt for an installment loan’s longer repayment term. Since you’ll make smaller loan repayments, you’d have an easier time coming up with the money. This could be helpful if you come across other money troubles before you could pay your loan in full.
You Can Extend the Repayment of an Installment Loan
Granted, you can also extend a payday loan term, but the costs could be higher than with an installment loan. That’s because the interest rate and other charges will apply to the entire loan amount. If you took out a $500 payday loan, the related extension fees will apply to that entire amount.
Whereas most extended installment loans only take into account the current amount owed. In this case, the additional charges will only apply to what’s left of your loan. If your unpaid balance is just $150, then the lender would apply the interest rate just on that amount.
Choose an Installment Loan for Easier, Hassle-Free Repayments
There you have it, your ultimate guide on Kansas City installment loans and what makes them a good choice. If you need to borrow a bigger amount that’s still easy to pay back, consider an installment loan. This way, you can get the cash you need now without worrying too much about delayed or missed payments.
Ready to solve your financial woes with a quick-approval Kansas City installment loan? Then please feel free to send your online installment loan application now! We’ll get back to you as soon as we receive and review your application.