Repayment of a loan in small installments always arises when the lowest possible loan amount is compared with the longest possible term for the loan. Since the borrowed loan amount is usually always paid back in installments, this is small if the total amount is divided by a large number of months for repayment.
Paying back a loan in small installments is particularly worthwhile for low-income borrowers since high installments can hardly be covered by your own income. Since you naturally want to (and should) avoid accruing default interest or burst rates as a borrower, a rough budget should be drawn up in advance about your own financial resources.
As a borrower, you can quickly find out how much monthly installments you can afford. Of course, the bank also carries out such a check on your loan application, but you can effectively avoid any rejections in advance.
Small rates usually lead to high overall costs
As positive as repaying a loan in small installments is for the borrower, the overall financial burden should not be neglected. The longer a loan runs, the higher the total interest paid. As a result, you pay less or have a lower burden for an installment loan with low installments, but in retrospect, the loan costs will exceed the costs of a loan with high rates and a short term.
As a result, a loan with small installments should only be applied for if you actually no longer have funds available in the month for timely and regular repayment. In addition, the definition of “small installments” is of course always different from the borrower to borrower.
A doctor can usually afford higher “small rates” than is the case with a secretary. To get a precise overview of your available options, you should use a credit comparison to calculate the individual options. Here you can easily get the monthly installments shown.
Pay off loans as quickly as possible
Furthermore, the rates should not be kept artificially low. If you have more secure financial means to pay off, these should also be used. After all, as a debtor, you usually want to settle your debts in full as quickly as possible.
In addition, it naturally has a positive effect on further loan applications if previous loans are paid off without any problems. However, if a loan still exists in its active form, further loans may become problematic.