Is a Simple Loan Right for You?
Originally Posted On: https://www.iquanti.com/
Borrowing money can be a bit of a minefield; there are so many financing options available that it can be hard to tell what’s best for your current situation. As with most things, when there are too many options, simple is usually best, and in the case of personal finance, you can’t go far wrong with a simple interest loan.
Why Simple Interest Is So Good
Put plainly; simple interest is so good because it’s not complicated! When a lender offers you a simple interest loan they should able to tell you exactly how much money you will need to pay back to cover the loan in full as it is calculated based only on the outstanding principal amount.
This is in stark contrast to compounding interest loans and debts where the interest is calculated on the outstanding principal amount as well as previous interest incurred, meaning that you end up paying interest on interest.
With a simple interest loan, any repayments you make firstly covers the interest for that month and then the rest goes to pay down the principal. The further you get into the loan term and the total balance decreases, the more of your monthly payment that goes towards the principal.
If you manage to make a repayment early, then a higher share of the payment goes towards the principal, meaning you can knock some time off of the term of the loan.
Is it Right For You?
When it comes to personal finance, any decision you make should be based solely on your personal circumstances and what best suits your needs. A simple interest loan could be the right choice for you if;
- You’re looking to borrow a lump sum of money – Whether you need to borrow money to do emergency repairs to your house, or you have a significant life event such as a wedding that you want to spread the cost of – taking out a simple interest personal loan can help spread the cost of expected and unexpected events in a manageable and affordable way.
- You already pay your bills/repayments on time or early – If you already have a good track record for paying your other bills on time or early each month, you are the ideal person that a simple loan is designed for. If you pay the repayments on time then you see the loan out in the term agreed, but if you can make some of the payments early you’ll actually knock some time off of the remaining term of the loan.
- You’re confident that you can meet the monthly repayments for the term of the loan – If you’ve checked your budget and know that the monthly repayments are manageable for you to make then you may be eligible to apply for a simple interest loan. Simple loans will only work as intended if the payments are made on time every month for the duration of the loan term.
The Bottom Line
If you are looking for an affordable way to borrow a lump sum of money with manageable repayment terms, then a simple interest loan is an excellent option. As long as you keep up with the regular monthly payments, you should never pay back more than you originally agreed to and don’t have to worry about and extra interest charges being added on.