It often happens during a counseling session in a bank: all documents for a loan have been submitted. Actually, nothing stands in the way of lending. Then the clerk asks a supposedly innocuous question. He would like to know whether the Payday Loan should have a long term. If it is a reputable employee of the bank, he then explains the advantages and disadvantages when a Payday Loan has a long term. However, some overemphasize the advantages, because the long term is certainly only for the bank. However, in many cases it is also better for the borrower.
If the Payday Loan is to have a long term: these reasons speak for it
It is primarily an arithmetic game. The longer the term of a loan, the lower the rates fall. This means that the monthly financial burden of the loan is lower. There is more money left at the end of the month. There is a simple rule: If you want to take a Payday Loan, but want to feel as little monthly burden as possible, the Payday Loan should have a long term.
Should the loan have a long term: the counter arguments
There are two reasons that speak against a long term. If you take a loan instead of three for seven years, you pay interest four years longer. So the loan is much more expensive. In addition, the terms of the loan may change over time. There is often a different interest rate (whereby almost all banks now guarantee at least interest rate stability over the selected period) or the special repayment rights change to the disadvantage of the borrower (the longer the term, the more expensive the special repayment becomes ).
Conclusion: find a compromise
The question of whether a Payday Loan should have a long term cannot therefore simply be answered with yes or no. In fact, the answer is: as short as possible, as long as necessary. It doesn’t help to take the shortest possible loan to outperform the installments. It is also of no use to take a loan as long as possible and pay significantly too much interest. The right term is the one that allows you to pay exactly the monthly rate that you can just barely do without in your monthly budget.