What You Need To Know About Single-Payment Loans?

Running short of money can be frustrating, especially when there are emergency expenses that you need to cover. Fortunately, with the different loan options available nowadays, it’s easy to get the funds you need in no time.

One of the amazing options available is a single-payment loan. While this loan option has some beneficial features, it’s important to understand how it works. This way, you’d be able to decide if the loan is the right choice for your situation. You’ll also learn how to use it properly.

Below are some of the vital things you need to know about single-payment loans.

How Does A Single-Payment Loan Work?

A single-payment loan shares many features with payday loans. For one, it doesn’t require partial payments. You’ll only pay back the entire principal and interest when the loan payment is due. Instead of making multiple monthly payments, you offset the  full cost of this loan at once.

The loan’s single payment date may vary, depending on your agreement with the lender. However, it’s typically on the borrower’s payday. Depending on the lender and the state of residence, single-payment loans may be converted to installments over a set period.

Potential Benefits You Can Get

As a borrowing option, single-payment loans have several potential benefits, such as:

1. No Need of Credit History

Traditional loans tend to require high credit qualifications. They usually check the borrower’s creditworthiness before approving the loan. But even if you have bad credit, you can still obtain a single-payment loan provided that you can repay it on time.

2. Fast Cash

Single-payment loans aren’t only easy to qualify for, but they also have a fast turnaround time. You can get the fund you need as quickly as the next business day. Some lenders even disburse the loan within hours. However, Credit Ninja recommends that borrowers explore more options before committing to anything. 

3. They Are Short-Term

The beauty of single-payment loans is they are short-term. This means that you won’t have to carry the burden of a debt that’ll take forever to repay. Having to pay the loan within a short time frame means there’s a low risk of running into more financial issues that may cause late or missed payments.

4. Save Money On Interest

Although a longer loan term gives you the flexibility in paying back the loan, it also means accumulating more interest charges over time. Since single-payment loans are short-term, the total interest payments may be lower. Also, paying off the loan quickly allows you to save the money that should have been put toward monthly loan payments.

Possible Drawbacks You Should Be Aware Of

Like other loans, a single-payment loan also comes with possible drawbacks you should be aware of. We’ve highlighted them below:

1. Little Flexibility

You might have little flexibility with single-payment loans. Unlike installment loans, you can’t break down repayment into more manageable amounts. Except you have the fund available before the loan matures, you might find it difficult to provide the whole repayment amount.

2. Small Loan Amount

While single-payment loans are easy to get, they may not always be enough to cover your immediate financial need. Note that such loans are designed to be paid off quickly. As a result, the amount you can borrow is typically small. While the loan amount often depends on the lender, the most you can borrow at once is around $500.

3. Doesn’t Help Build Credit Score

Since lenders of single-payment loans don’t usually run a credit check, they may not report on-time or late payments to credit bureaus. This can be good because it means your credit score won’t be affected if you default. However, it won’t help build your credit, even if you repay the loan on time.

4. Risk of Borrowing Cycle

Taking out a single-payment loan can be less expensive if you can promptly repay it. However, if you’re unable to pay the loan in full on the agreed date, you might have to borrow again, which eventually costs you more. This behavior can perpetuate a cycle of accruing and relying on debt.

When To Consider A Single-Payment Loan?

A single-payment loan can be the perfect option in some circumstances. But like other loan options, they can take a toll on your finances if you rely on them all the time. If you want to maximize the benefits and keep away from its drawbacks, it’s crucial to know when to consider using a single-payment loan.

Since this type of loan is a short-term personal loan, it works best if you need a relatively small amount of money. That way, you’d be able to pay the entire loan without much difficulty. If you expect to receive some funds before the loan is called in and you need cash right away, it might also make sense to get a single-payment loan.

Final Thoughts

There is no fixed financial solution for every borrower. What’s sure is that every loan comes with a certain amount of risks. Remember that a single-payment loan can either help or hurt your finances. That’s why it’s important to weigh your options and consider every possible financial consequence.

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