The web has changed the way we approach the banking world, in particular for the investment sector (with online trading) and for that of financing. In the latter sector, in addition to acting on rates, obtaining a easing of economic conditions (especially for the elimination of accessory costs and in some cases also for the containment of the interest rates applied), it has above all revolutionized the methods and times of disbursement as well as the number of minimum installments.
So if until a few years ago short-term loans ranged from a minimum of 12 months to a maximum of 18 months, today the 12-month threshold has become almost the maximum with a minimum duration starting from just 3 months.
Installment and duration: what is the best relationship for you?
In a loan usually the shorter the duration and the lower the impact of the interest expense. On the other hand, the amount of the installment logically increases and can be difficult to sustain even if it is a rather limited period of time. For this reason, when choosing 12 months as the amortization plan for a loan, you must be aware that the installment for medium amounts will be very high.
It is no coincidence that loans repayable in 12 months are generally considered within the category of mini or small loans as regards “personal” loans. For those finalized it is in fact a “long” duration in the case of technological products and household appliances while it is insufficient in the case of the purchase of a car or a motorcycle.
To evaluate the best relationship between this duration and the amount of the installment to be repaid, it is useful to use a simulation tool. In this area there are two possibilities:
- use a calculation tool made available by the person offering the loan (for example Lite Lender Company, Across Lender, etc.);
- use an independent tool.
In the first case there is the advantage of being able to transform the simulation into a real loan estimate, to be saved and possibly forwarded and then to start the financing request in an official way. On the other hand, we are limited by the fact that the conditions are linked to the rate proposed only by the financial or bank rate. So the generic aspect of the evaluation is lost but the strictly practical one remains.
In the second case it is instead possible to do a generic simulation as well as various tests with “standard” rates without being tied to a specific rate proposed by a bank or a financial company. These ‘ super partes ‘ tools also make up for the lack of calculation tools by banks or financial companies that do not offer the online service. The tool is almost always reliable but one must remember to insert the exact Taeg applied and not the Tan. Finally, it must be remembered that a simulation does not have the character and does not offer the protection inherent in a real estimate.
How to choose?
In the small loan, the annual repayment term affects the maximum amount that can be obtained, since it will be equal to the monthly net salary, also influencing the possibility of renewal.
Outside of this particular category, however, there are other limits, as in the case of the transfer of the fifth and the vast majority of the debt consolidation loans: in both cases, the minimum duration starts from 24 months. So if you want to have a certain freedom of choice by aiming for a one-year loan repayment term, you must focus on what are generally considered fast loans, dedicated to those who need liquidity for short times and of limited amount ( although of course there is no shortage of exceptions, where sums of $ 10,000 or something more can also be reached).
For this reason, a generic tool is useful to get an idea of what the market could offer on average but does not guarantee a complete and reliable knowledge contribution. For example, let’s take two institutions that have many conventions in the main shops and at the same time offer online loans such as Lite Lender Company and Across Lender.
For a modest sum like 1000 USD the two banks have in fact a very different policy: Across Lender allows you to repay the 1000 USD already starting from 6 months. Instead Lite Lender Company for personal loans does not consider the 12 months at all and starts from no less than 18 months ( as can be seen from the official website making an estimate of 1000 USD on 28/08/2017 ).
Also for this reason, an upstream choice made on paper is not possible and risks being misleading. In this perspective, the comparators offer the possibility of making a general assessment but it is always necessary to go down on the merits and then make a quote for more proposals that would seem the most convenient at a first comparison.
Who offers them?
Outside the “finalized” loans, it is necessary to search for personal loans preferably classified as: mini, young, smart, etc. Not all banks expect them and the offer can be quite varied. For example we find:
- Across Lender : from 6 to 120 months;
- Webank : in the small loan from 6 to 60 installments;
- Unicredit : starting from 12 months for the smart Voucher and the Mini loan (first also for the youth loan). For the Easy version which starts from just 6 months to reach up to 36 months (linked to the amounts requested).
Obviously these are just a few examples, which cannot replace a research and evaluation that must always be done in a very personal way, taking into account the characteristics that the required funding must have. Not all loans in fact offer the same characteristics also from the point of view of flexibility thanks to the presence of management options.
Conclusions and opinions on convenience
From what has been said, it is clear that 12 month loans are only useful for small amounts and urgent needs. In general, they risk making the installment / duration ratio not performing especially considering the fact that the shorter the duration and the greater the impact of the rates applied (as in the case of the Taeg which, due to ancillary costs such as management and preliminary costs, risks not to be “absorbed”).