It’s not always easy to prepare for an unexpected expense. It’s the nature of the unexpected; these bills show up suddenly out of the blue. One day, you’re motoring along the highway as usual, and the next, you’re pulled off to the side of the road with a smoking engine.
If you don’t have emergency savings set aside to help you cover the tow truck or your trip to the mechanic, you may turn to emergency installment loans. As their name suggests, they’re designed for emergencies.
According to the loan specialists at MoneyKey, they’re meant to be a backup in case your savings fall short of unexpected emergency expenses. For more information, visit Moneykey.com to see how these installment loans work as a safety net.
From this definition alone, they may seem like the perfect fit whenever you’re facing an unforeseen bill or repair. But individual emergency installment loans vary greatly depending on your needs, finances, and lender.
Before you sign along the dotted line, you need to know if it’s the right option for your emergency right now. Check these three things to help you figure this out.
1. Principal
Your principal is the amount of money your lender grants you. How much money you can borrow at any given time is a crucial detail of your agreement, as it determines whether you can afford to cover your emergency expense.
Don’t expect to receive a massive amount with an emergency installment loan. These products tend to advance you $3,000 or less, as they’re designed to be temporary stopgaps for minor, non-recurring expenses.
2. Terms
Your terms outline how long you have to repay your loan and close out your account. Usually, emergency loans come with relatively short terms. Unlike student loans or mortgages, both of which can take decades to repay, emergency installment loans may only take a few weeks to a few years.
Short terms may work to your advantage, as it’s not a long-term commitment. You’ll pay off what you owe faster, so you won’t have to budget around your debt for ages.
Nevertheless, they may get you into trouble if you don’t properly budget for them. The pressure is on when you have less time to pay off what you owe. If something interferes with your cash flow during that time, you may find it hard to meet your obligations.
3. Rates, Fees, and Charges
Your interest rate plays a massive role in how much your loan will eventually cost you. As a percentage of your loan, the interest rate gets added to your total according to a specified schedule. It could accrue daily, monthly, or even yearly.
The higher your interest rate ends up being, the more your loan will end up costing you. This is true even if your terms are relatively short. Although there’s less time for interest to accumulate, the higher percentage will add a significantly larger portion during the time it does have to accrue.
The interest rate is important, but it is by no means the only fee applied to your loan. There is a wide variety of charges that may apply.
You can find these charges in the fine print of your loan agreement, alongside your terms and principal. So, always read your contract carefully before you agree to their terms. It can help you shop around for an emergency installment loan that fits your needs.
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