Payday loans have come under the scanner lately with the Consumer Financial Protection Bureau calling it long term and expensive debt. Another fast-growing loan category attracting low-income group is the short-term loans.It happens in the unbanked sector and is a threat. When the dark side of the installment loan leads is analyzed, the safety measures needed for it is also realized. www.forbes.com/sites/forbesagencycouncil/2017/04/21/how-affiliate-networks-have-taken-affiliate-marketing-mainstream/#2cbad06e569dshares information on how short-term loan loans and affiliate network work in close coordination.
Advantages of installment loans
A comparison between installment loans and payday loans show that the former is lucrative as it does not have a final balloon payment and can force the borrower into deeper debt. The installment loan helps those with poor credit history to improve their standing. According to experts, it is not foolproof when it comes to safety standards. The installment loans come with high rates, additional fees, loan flipping and other downsides.
Installment loan does not seem to involve a lot of money. What makes the loan risky is the financial vulnerability of the people who take the loan. These are seen as a one-time solution to a financial emergency among those who do not have any savings. Though, the loan can be renewed and can be clubbed into a new loan. The companies that sell installment loans are capable of holding on to their customers, making the process repetitive. The lender makes money available so that they can renew and get another month of paying interest.
The payments are often structured so that the interest is paid earlier. It goes to explain that the refinancer pays the interest but not the principal, leaving them in debt. Most of the customers pay their disposable income on installment loan debts. It was studied that in some cases a loan more than a decade old could attract an APR of 800%.
Add on products
There are some credit card companies forcing add-on products like protection plan. In some case, the customer is forcefully sold products like life insurance, car insurance, and disability insurance. New customers are aggressively sold insurance packages with installment loans. In most cases, these add-ons are only optional, but customers are not informed about it.
Most companies selling loans prefer installment loans than payday loans. The companies are trying hard to balance the demand keeping the regulators and consumer groups in mind. When it comes to federal regulations the lenders opt for installment loans is less intensive and hence preferred by lenders. Though, experts feel that installment loan may not be a high priority as it may appear to be. The ultimate goal of Consumer Financial Protection Bureau is to remove credit from the large segment of the population. This is possible only when the consumers are educated on the pros and cons of installment loans and payday loans. The APR, repayment terms, monthly installments all determine the attractiveness of the loan. The consumer has to think wisely before choosing to avoid the debt trap.