6 Month Loan

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6 Month Loans are often seen as the ideal loan length as repayments are at an easy to repay amount each month.

A 6 month loan is often seen as the ideal short term loan length. Repayments on a 6 month instalment loan are spread over a decent time making loan repayments more affordable espectially when compared to a traditional Payday Loan. 

6 Month Loans and How They Can Help

The world of short term lending is a very different place to years gone by. Consumers are now faced with a great selection of instalment based products such as 6 month loans, which can help spread the cost of short term borrowing over an agreed amount of time. This is a far cry from the previously adopted approach to lending which saw consumers repay their loans in a lump sum. This type of lending caused many issues for consumers and lenders alike when increasingly it became evident that the loans set out to borrowers were in simple terms unaffordable. This led to debts and cycles of debt and the lenders developing a terrible name for how they supported the market in which they existed. Thankfully the vast amount of change which has taken place within the market in the last few years means consumers are now being treated in a much better manner and therefore obtaining credit more realistically. For the lenders also, the market is becoming more stable and the product more manageable thanks to instalment loans and their offerings.

In the past short term lending became an issue because the product became unaffordable. As the years went by the market served did not see improvements in their finances which meant short term loans became more and more frequently used. Unfortunately the sheer nature of the loan meant consumers could quickly and easily run up a number of debts that could not be paid. At the time lenders were offering the opportunity to borrow anything from £100.00 to £1000.00 and if approved the customer was expected to repay the full balance on their next employment pay date, typically within no more than 31 days. The interest related to this type of lending was often applied at the point of approval meaning it was not specific to the period of time the money had been borrowed for. This made for a sizable lump sum for the borrower, often in the region of £400.00 for a typical £300.00 borrowed. It was later highlighted that this style of lending was not affordable because many consumers were avoiding the full repayment by instead making an extension payment. An extension allowed the customer to repay only the interest of the loan and extend the full repayment to a later date. The more extensions a customer repaid did not actually reduce the amount owed in any way and simply served to keep the customer in a cycle of debt.

 

This poor practice of not assisting customers to reduce the amount they owed lead to the governing bodies taking control and insisting many lenders change their practices. Nowadays there are far more instalment lenders who offer a choice of repayment terms, like 6 month loans, which give the customer 6 month sto clear the debt in full. These are far better equip to assist consumers with a manageable short term loan. Many lenders help to reinforce this new approach by focusing heavily on affordability as part of their application process. This means asking the customer to declare all the details of their monthly expenditure. This means a customer most understand their own budget to then replay the information to a potential lender.

A budget can be worked out very simply for the purpose of say 6 month loans. A consumer must honestly and accurately list all the bills that must be paid on a monthly basis, such as rent, living expenses and any other regular costs. This information must then be summarised and compared to the monthly salary. The amount that remains then gives any consumer their disposable income. Disposable income expresses the amount a consumer has spare at the end of the month. This is the amount which can then be used to maintain a loan repayment. Let’s look at an example, a consumer is looking to borrow £300.00 for an emergency vet expense. They earn £1400.00 monthly and having listed all their total outgoings are confident on a normal month they have £300.00 spare. The consumer does not want to leave themselves short and use all their disposable income in one go and therefore is considering 6 month loans. In this specific example it would be wise for the consumer not to commit all their spare income to one source incase the remainder of the month requires a little extra money here and there. An instalment based product means that instead the consumer can select a repayment term which fits within this budget and is therefore affordable. 

How to use 6 month payday loans

As the years have passed the resource of online borrowing has become more and more popular. The resource was first introduced about a decade ago as a result in the change in consumer spending habits as a whole. For many years now consumers have been using the internet as an incredibly powerful tool. Whether that be for work purposes or for personal gain, many cannot get through there day without the internet playing a part. Take banking for example, most consumers now take full advantage of the ability to know exactly what is happening with their money through the use of online banking. The same can be said for shopping. In the last decade a massive amount of consumers have converted their spending habits to exist solely online wherever possible. Whether it be a holiday, a pair of shoes or furniture, many consumers are now more than happy to make purchasing decision online rather than in person. The reasons for this is not only as a result of improved safety associated with internet use but also the convenient nature of the internet as a whole. Instead of having to disrupt their ‘normal’ routine a consumer can go online and shop nowadays at a time which suits them as an individual. Look at food shopping, gone are the days when the weekly shop meant dragging the entire family to a supermarket, instead companies make readily available the resource to shop as they wish. As a result consumers are more confident using the internet than ever before and therefore it is little wonder borrowing has followed suit.

In terms of using online borrowing to its full potential consumers need to be aware of the changes which have taken place over the last few years. In the early days a consumer was more likely to be present with a one-off repayment loan rather than 6 month payday loans for example. As time has passed and the spending habits of consumers have changed as discussed above, the product being offered by these type of lenders has had to adapt. In fact many consumers are now far more comfortable and better able to commit to 6 month payday loans than repaying the amount outright. This can be represented in the spending habits of consumers in other areas, say furniture for example. Nowadays a consumer is more than happy to commit to buying a sofa on credit and making monthly repayments towards the amount owed until repaid. In the past it was more likely that the average consumer would make such purchases on an outright basis because the general culture for spending deemed this the correct way to do so. Nowadays though as we have discussed consumers want to have more flexible repayment options which can be budgeted alongside their other monthly commitments.

As a result in today’s market the likes of 6 month payday loans are far more popular amongst consumers. Instead of agreeing to repay a small loan as a lump sum on their next employment pay date, consumers want to have choice for their borrowing needs. In the past consumers who committed to repay their short term loans as a lump sum often found upon arrival of the due date, the amount agreed was simply not affordable or realistic. This is why many consumers chose to extend or roll over these loans, increasing the total cost of credit month on month. Take for example a customer borrowing £200.00, this would have likely seen a total repayment due as a lump sum on their due date of £248.00. For those who could not meet this amount, the lenders offered the ability to extend and repay only the interest at £48.00, extending the £248.00 to their next pay date. Although this served to avoid a default in the first instance, over time it became clear consumers were often struggling to ever meet the full repayment when yet another employment pay date arrived.

That is why it is more important than ever that consumers choose a suitable repayment term such as 6 month payday loans. Instead of agreeing to an amount which is unrealistic to their existing living expenses, a consumer using the market nowadays can agree in advance to repay the loan at a rate which is affordable. Lender now typically offer a number of repayment terms, starting from 3 months through to 12 in some cases. This means the consumer can make an informed choice at the point of applying and in doing so take into account all the other monthly costs which are important to them. 

 

About the author:

Kieran Moulden is the founder and Managing Director of True Blue Loans (www.trueblueloans.co.uk), a company offering instalment loans over 3, 5 or 9 months, with fixed repayments and no fees, just daily interest. He is passionate about ensure that consumers get a fair and honest deal when dealing with short term consumer finance companies.

 

By Kieran Moulden