Risks Associated With a 12-Month Loan

786 Loans helps borrowers find long-term loans as well as short-term loans. You don’t have to have a perfect repayment history either – it’s our job to find the best long-term loans for bad credit applicants too.

In this article, we look at the pros and cons of long-term loans.

•    What are the advantages of a long-term loan?
•    You have much longer to repay

With payday loans, you have to repay it in full plus the interest within 30 days of taking the loan out. With short-term loans, you have, usually, between 2 and 12 months to repay the money you borrowed plus the interest on top. If you want to take out a sizeable amount of money but you’ve only got a short amount of time to pay it back, you might not be able to comfortably make the repayments on time and in full to your lender because there’s no enough spare cash in your household at the end of the month to meet the cost.

   
      With a 12 Month Loan, you have up to 12 months to make the repayment. Lenders typically offer you to borrow an amount of £100 to £1,000. Moreover, you do not have to provide any collateral as security and also, you do not have to arrange a guarantor.

Interest rates are normally higher

Short-term loans tend to have much higher interest rates than long-term loans. The higher the interest you pay on a loan, the more it costs you in total to pay it back in full. With 12 Month Loans, the interest rate you may be offered will be a fraction of what you would be offered with a short-term loan or a business loan. However, this is not always the case so make sure you read any offer you receive from a lender carefully before deciding whether it’s the right deal for you and whether you can afford it.

You can’t pay for big-ticket purchases

With most short-term loans lasting 12 months or less, you’ll struggle to find a lender who will be happy to give you a loan of more than £2,500. The reason? They’re concerned that paying back the loan and the interest which put too much pressure on your disposable income. Your disposable income is what you have left from your wages after you’ve paid out everything you need to pay out for over the course of a month (like mortgage, rent, insurance, Sky, and so on).

Lenders are much happy to allow borrowers to take out loans of up to £35,000 as long as the repayments are spread over a long enough time. This gives them the peace of mind that you can afford to make your repayments to them in full and on time. That is why you may find more options for personal loans rather than short-term loans.

What are the disadvantages of a 12 Month Loan?

 

The longer you borrow, the more interest you pay

Although by taking out your loan over a longer period, you will reduce your monthly repayments, you’ll end up paying more for your loan over time. 

Tougher acceptance criteria

The more money you borrow, the more risk a lender is taking. This extra risk means that it can be harder to find a company who wants to lend you the money. If you’re looking for cash loans for bad credit applicants, finding a loan company to work with you will be even harder. You may need to provide more information. It may take longer to be accepted and, therefore, longer to get your money.

786 Loans works with borrowers who want short-term loans (including long-term loans) and we know the best finance providers to present your application to.

Borrowing more than you need

Because you have up to 12 months to pay off your loan, many borrowers are tempted to ask for £1,000 or £2,000 more than they actually need. Please make sure that, before you apply for a loan, you know exactly how much you need to borrow and why. There’s no point to you in paying interest on the money you don’t actually need.

Early repayment charges

Some lenders will charge you for either overpaying your loan (so that you bring the balance down faster) or for paying your loan off early. Please check a lender’s terms and conditions before agreeing to any loan for repayment charges as, if you find the money to settle your loan early, this will be an unpleasant and unexpected surprise.

Account Fees

Most lenders charge you if you miss a payment or they have to chase you for payment using either a letter or someone from their own debt recovery call centre. Again, as with early repayment charges, check terms and conditions carefully before accepting a loan offer.

If a 12-month loan is right for you, get in touch with 786 Loans. Even though there are significant advantages to a 12-month loan, it’s important to consider carefully what the downside is if you have been offered one. You must shop around for the best loan so that you get a deal that’s right for you.

That’s where we come in. We’re not a lender, we’re a broker. We match lenders and borrowers in seconds using our state-of-the-art computer system. We’ll contact all the lender we think you’ve got the best chance of having your application accepted and, then, we present you with the very best deal we’ve found. You don’t have to accept any offer we find for you and our service is free at all times.