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Why 12 month loans over normal payday loans?

“How long you need a loan for?” is one of the most significant questions while applying for a payday loan? For usual short term loans, the repayment period is naturally short “may be a month or less”, while a long term personal loan can be taken for anywhere between a few months to a number of years. The former is typically referred to as a payday loan which helps you cover your urgent expenses till you get your next paycheck. The latter however is called an installment loan sometimes, which requires the loan amount to be repaid in monthly or sometimes bimonthly equal installments.

The 12 month loans fall into the category of long term installment loans that offer a more convenient and smooth repayment structure as compared to payday loans. Providing a significantly longer time to the consumers to arrange the funds and make timely repayments. Installment amount and frequency however remains standard throughout the loan tenure so that the borrower remembers all the due dates and amount clearly.

Interest rate charges for 12 month loans

The ‘interest rate’ for these longer month loans proves to be a little higher when compared with payday loans. And that is natural because the loan amount is kept at risk for a longer term by lenders. It is very challenging on the part of lenders to determine which borrowers would be able to repay the loan amount in full and which won’t. In a longer period of 12 month for example, the financial situations of the borrower might change dramatically. Similarly, different types of loans involve varying degree of risk and so the interest rates are charged accordingly.

If the applicant has some bad credit remarks in the past, he might be offered a much higher interest rate than usual. The reason being same, the lenders charge a higher interest rate to the customers having a high risk profile. Most commonly these long term 12 month loans are approved only when the applicant does not have a bad credit history. But, if the degree of risk is affordable by the lender, they accept the applications with less than perfect credit rating as well.

No guarantor loans

A guarantor is someone who guarantees your repayment of loan to your lender. Some lenders offer longer term month loans where a guarantor is not required in order to take out a loan. However it is only the lender discretion if it approves your 12 month no guarantor loan application, since it involves larger risk to lend money for the lender. However in some cases lender may ask you to go for 3 to 6 month loan duration if you cannot produce a guarantor, as opposed to going for a full year contract. This has made this loan option more popular in comparison to normal guarantor loans. The whole application procedure is similar to payday loans and money is disbursed within a day.

However some lenders can offer you 12 month loans with no guarantor required to guarantee your repayments. This happens only on the discretion of lender provided you carry an exceptional well credit history. This has made this loan option more popular in comparison to normal personal loans. Since the procedure is as similar to payday loans.

Is a 12 month loan right fit for you?

A long term loan might not be suitable in every financial situation. A borrower must determine for himself which type of loan suits him the best, so as to make timely repayments. Borrowing 12 month loans is a long term commitment, which involves more scheduled repayments and often a larger repayment amount. So, if you are prepared to stabilize your monthly budget, expenses and income for next 12 months and it is more likely that you can successfully complete your loan in 1 year time.

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