Are Instalment Loans Good Value for Money?

When you are looking at loans and wondering which ones you might like to take out, you may wonder if they are good value for money. You might think that a mortgage is, for example, because you use it to buy a home that you live in, that should increase in value and will improve your life. However, you may wonder whether all loans can add this value, including instalment loans. It might depend on what you are using the loan for but it is good to think through the process so that you can decide for yourself.

What is an instalment loan?

An instalment loan is pretty self-explanatory as you borrow money and repay it in instalments. However, it is different to some other loans as they tend not to be offered by traditional lenders and they are shorter term than personal loans. It is normally the case that you will borrow a fairly small amount of money and then repay it over a few months. They are similar to a payday loan in that you can take them out even if you do not have a good credit record. However, you will not have to repay it in one lump sum like you do with a payday loan, but you will be able to spread the payments out. This can make it easier to manage repaying the loan as you do not have to find the money all at once. This is something that can be tricky for some people, especially if they borrow a larger amount of money or have lots of other things to pay for as well as their loan repayment. These types of loans can be arranged quickly and easily and there is a selection of lenders that will offer them.

Finding the best value instalment loan

As there are many lenders offering an instalment loan, it is a good idea to compare them. It is worth trying to make sure that you find a loan that offers you really good value for money. Although it is often the cost that comes to mind when thinking about value for money, we need to think about what we are getting or the cost. It is not worth having a really low interest rate if there are lots of hidden charges or a costly loan form a well-known lender if they do not offer good customer service. So, think about what you are looking for in a lender and a loan. Work out exactly how much the loan will cost you in monetary terms and then you will be able to easily compare them on price. Then take a look at the lenders website and think about whether you can see any significant differences between them. It can be good to ask others whether they have used this sort of lender and whether there are any that they would recommend as well. It is a good idea to think about whether having a well-known lender, one with good reviews, one with good customer service or things like that are important to you and whether you would be prepared to pay extra money to get these things. This will allow you to compare them properly and think about which of the lenders you think will provide you with the best value for money.

Is the loan going to add value to my life?

Before you take out the loan it is also worth checking whether the loan will add value to your life as well. Loans can be extremely useful and give us a lot of pleasure but only if we take them out at the right time and buy the right things with them. It is therefore worth thinking about what it will do for you and whether you think that it will add a lot of value. It could be that you want to be able to buy something fun and, in this case, it could be a lot better to save up rather than borrow. However, if you need to repair your home, pay a bill, make ends meet or things like that then the loan will add significant value to your life. It is a very personal decision as something that you think will add value to your life may not be considered to be worthwhile to others. Therefore, try to think about it in terms of you rather than anyone else. It can be a tricky decision though and it is good to have a quick think about things and you will be able to make the right decision for you. If you are struggling to decide then you might want to chat to friends and family about it as they might be able to listen to your reasoning and let you know whether they feel that it is justified or not.

Should I Help my Child with Guarantor Loans?

There is a possibility that at some point in time that you might be asked by your child to be a guarantor for them so that they can take out a guarantor loan. You may wonder whether it would be the right thing for you to do or not. It is a tricky decision as there is a lot to consider.

What is a guarantor loan?

Firstly it is wise to find out more about guarantor loans. If you do not know much about them then do some research so that you can understand how they work and what you will have to do. Guarantor loans will vary depending on the lender as well, so find out who your child’s lender will be so that you can investigate them specifically. All guarantor loans will allow borrowers that have a poor credit record to be able to borrow thousands of pounds. They will be expected to make regular repayments, but if they struggle with this, then the lender will ask the guarantor to pay up instead. This means that the guarantor needs to have a good credit record and know that they will have the money available to make those repayments if necessary.

Can you afford to help?

You will therefore need to find out whether you can afford to help. You will need to find out how much you might have to pay each month first. It might be that you will have to pay more than your child normally pays as there may be extra fees added on if they have to take the money form you instead. Find out from the lender whether this will be the case. Then you will know exactly how much money you might have to find and this will allow you to be really well prepared. You will be able to check to make sure that you will have the money available. It is also wise to make sure that you will have enough even if the interest rates go up. There is always a chance that this might happen if the interest is a variable rate. If the interest is a fixed rate then it should not change and therefore the amount that you repay will not change. However, a variable rate can go up if the base rate goes up and so it is worth checking this and making sure that you will have enough.

It is worth thinking about whether there might be times when you need some extra money and if this guarantor arrangement might cause problems. It is always best to assume that you will have to pay every payment. It is unlikely that this will be the case but it is best to plan for this eventuality just in case and then you will know that you will be able to cope should it occur. If you child is suddenly unable to work or loses their job, for example, you will have to make all of the repayments and situations like this are very difficult to predict and therefore it is best to be well prepared.

Will it make other children jealous?

If you have more than one child then it is really important to think about the impact that you being a guarantor might have on them. If they need help form you in the same way you may not be able to be a guarantor for them as well as your other child. If you are being careful with money to make sure you have some if needed it may mean that you will have less to give them for things, that is if you tend to give them money. You might just find that they feel you are taking preference over the other child. Some siblings do tend to get very jealous of each other and so this could be a problem if this is the case. Some siblings are not like this and you will know what your own family is like and therefore what they are likely to be like in this specific situation.

Is it right to help?

Some parents may not think that it is right to help their child like this. They may feel that once they are old enough to borrow money it means that they are old enough to be able to manage their own financial affairs. Of course, as a parent it would be hoped that you would have helped them with finance by giving them some teaching on how to be good with money. This is not something that is taught in school and therefore needs to come from parents. If you feel they have not enough help then you may choose to give them advice instead of being a guarantor or perhaps as well. You might want to make sure that they learn from the experience and that they know how to improve their credit rating and choose to borrow wisely in situations which will improve their financial position.