You all know that installment loans are always better than those with a lump sum repayment. Since you will be paying down fixed monthly installments, you can easily make a budget to ensure that you do not fall behind repayments while managing your expenses.
However, if you choose installment loans, you will find them divided into two categories: weekly installment loans and monthly installment loans.
Borrowers often get confused about which option they should choose. For some monthly installments, the option can be better while for others weekly installment option may be favorable. However, when both alternatives are available to you, you will likely choose a monthly installment option. Some people especially those who are daily wage earners may choose the weekly installment option.
Now the question is which repayment plan is better and more affordable to you. First of all, you should not follow the crowd. If you are given both options, you should smartly choose the repayment option. This blog will help you know which one you should decide if you want to save your money.
Can you save money on interest with weekly repayments?
Whether weekly repayments are better than monthly repayments, depends on the structure of repayments your lender follows. Generally, weekly repayments will naturally be better than monthly repayments because the more frequent you pay down, the more you save on interest. This will be possible only when your lender will divide the total repayment amount by 52.
In this scenario, your weekly repayment will definitely be slightly higher than your monthly repayments. Since you are to pay down each installment every week, you will have much more burden, but you will save a lot of money in interest. Understand it with an example:
Suppose you have borrowed £5,000 at 10% for a year. Here is the principal and interest amount under both options:
Option 1: weekly installments
Weekly repayment – 421.89
Total interest – 62.72
Option 2: monthly installments
Monthly repayment – 439.58
Total interest – 274.97
Now you can see that the weekly repayment option is better than monthly repayment if you want to save money in interest. However, you will feel much more burden.
Further, it is noted that some lenders charge one-fourth of your monthly repayment as a weekly repayment. It means you will be paying more money in interest than you would if you paid monthly installments. So, make sure that you ask your lender how they share out your regular repayments.
How to decide on the repayment plan
It is up to you how you want to manage your debt. Installment loans in the UK are generally much more manageable, but you still have to figure out how you can save more money. If you receive your income weekly, you will be able to pay it down every week.
However, if your lender does not allow you to pay down every week, you should set aside that particular amount as you receive your income every week, so you do not fall behind repayments.
Can you switch the repayment plan?
Whether you want to switch from a monthly repayment plan to weekly or vice versa, you will have to confirm if your lender has the other option, and if they do, do not forget to ask about add-on charges. Make sure that the deal helps you save money despite additional fees.
The bottom line is you can choose either monthly or weekly loan installments. Each has its pros and cons. You have to decide which one is favorable to your current financial condition. Whichever repayment plan you opt for, make sure that it does not let you fall behind repayments.