Planning is the best way to build assets. If a big-ticket expense is on the cards, it may wiser to finance it through a loan instead of shelling out your hard-earned savings. Instalment loans can help you spread the cost of your purchase across a few months over fixed monthly instalments.
One of the most common forms of instalment loans is 12 month loans. 12 month loans can help you break down major expenses into manageable instalments over 12 months. So instead of paying a lump sum upfront, you can borrow a 12-month loan to cover the costs. Affordable monthly instalments can significantly ease your financial burden.
In this article, we’ll learn more about 12-month loans and their uses. Should you use a 12-month loan for debt consolidation? Read on to find out.
12-month loans can be categorized as instalment loans, which are essentially personal loans that you can repay over 12 months. These loans help you finance big-ticket purchases or emergency expenses with a quick disbursal, which you can pay off in affordable monthly instalments.
Paying off a lump sum can put a lot of pressure on your finances. 12-month loans help you maintain your financial balance and make repayments more manageable. Reasonable monthly instalments help in easing your financial burden.
12-month loans are high-cost short-term loans, which means that the interest rates for these loans are high. But just how high the rates can get depends on your credit score. Your credit score is an integral aspect of your loan application. It helps the lender assess your creditworthiness.
Credit scores are a way for lenders to assess the risk involved in lending money to a borrower. If you apply for a 12-month loan with a low credit score, your chances of qualifying for competitive rates are very slim. Planning your loan can buy you some time to improve your credit score before applying for a loan. Applying for a loan with an enhanced score could improve your chances of securing a loan with better interest rates.
12-month loans can be a great opportunity for you to boost your credit score if used responsibly. Lenders report your repayment history to credit bureaus, and each timely repayment contributes towards a better credit score. You may set up a direct debit for your monthly instalments to ensure timely repayments.
Failing to keep up with your instalments can be detrimental to your credit score. If you don’t settle your payments on time, your lender may even get a County Court Judgment issued against you. CCJs can stay on your credit report for a long time, hampering your chances of securing credit in the future. This can adversely affect your financial life goals. Therefore, it is in your best interest to make timely repayments towards your loan.
Payday loans are one of the most notorious high-cost short-term credit products. The interest rates and APRs for these loans are exorbitant, sometimes exceeding 300%. These loans can be borrowed as a lump sum, and are designed to cover a short-term cash crunch. Payday loans are typically paid off within a week or a month.
Payday loans came under the FCA’s radar after a rampant growth in their popularity as a quick cash alternative. To safeguard the consumer’s interest, the FCA imposed certain price caps on payday loans.
For every £100 borrowed, the lender cannot charge more than £24 over a 30-day loan term. In case you miss a repayment or don’t repay an instalment on time, the maximum default fee that a lender can impose is £15 plus the interest on the amount you borrowed. The overall cap also ensures that you don’t end up repaying more than twice your loan amount to the payday lender.
How to apply for 12-month loans – bad credit?
Debt consolidation is a great way of simplifying your debts and organizing your finances. You combine all your debts into a single loan. 12-month loans can help you pay off high-interest debts. Having to pay off a single debt instead of keeping up with multiple loans enables you to manage repayments more efficiently.
Conclusion
You can use a 12-month loan to finance unplanned medical bills, emergency car repair, pre-planned home improvement, or debt consolidation. 12-month loans can be a good way to improve your credit score. All you need to do is sincerely pay your instalments on time. Each timely repayment will boost your credit score, making it easier for you to secure credit to finance future goals.
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