Part of a good personal financial management plan involves following a budget and maintaining a savings, because practicing responsible spending is the best way to avoid debt. However, if an emergency arises that has unexpected costs, obtaining a loan may become necessary. In these cases, borrowers should ensure their ability to repay a loan in accordance with the loan terms. Failing to comply with a repayment agreement can result in derogatory remarks on credit history reports, which can negatively impact credit scores. It can be useful to become familiar with different types of loans and their repayment terms.

Payday Loans

Because payday loan lenders do not typically check the borrower’s credit score, it is easy to qualify for this type of loan. It is important for borrowers to understand repayment terms before signing a loan agreement, since failing to repay the principal amount borrowed plus interest and any fees can put the loan in default. Payday loans must typically be paid back in full by the borrower’s next payday. Usually this term is 14 days, but depending on the lender, it may be sooner. If a loan isn' t repaid on time, it may be rolled over or extended, which will incur additional fees on the loan.

Credit Card Advances

Credit card cash advances, funded from the available credit and withdrawn from an ATM using a credit card, are repaid monthly based on a minimum amount calculated by the credit card issuer. This minimum amount must be paid to avoid additional fees and late remarks being reported to the credit bureaus. While only the minimum amount is required to be paid each month, it is important to note that the unpaid balance continues to accumulate interest. Because credit cards provide a revolving line of credit, the repayment window for cash advances can extend almost indefinitely. This lengthy repayment term can help a borrower’s cash flow, but can also keep the borrower in debt for a longer period of time and increase the total amount that a borrower repays due to interest accumulated over time. Borrowers do have the option to pay more than the minimum, up to their full amount owed, which can reduce interest accrued on the debt.

Installment Loans

For installment loans, repayment is often split into bi-weekly or monthly installments over the loan term. On identified due dates, borrowers are required to pay a portion of principal plus the interest and fees that have accrued during the payment period. Installment loans provide for a longer repayment window than payday loans, but have a specified maturation date rather than an indefinite repayment period that credit card cash advances may provide. This type of repayment schedule is less restrictive of cash flow than payday loans, but can be more so than cash advances, depending on the amount borrowed. And depending on the term-length, following a repayment schedule for an installment loan can mean that a borrower is in debt for a shorter amount of time than a borrower making minimum payments on a credit card balance.

When looking at short-term lending options, borrowers should carefully consider their ability to stay current with repayment while managing regular living expenses. A payday loan should not be used if the borrower isn’t certain he or she will be able to repay the loan and meet monthly expenses on his or her next payday. Borrowers should likewise avoid maintaining a balance owed on the credit cards to avoid piling interest each month. Similarly, installment loans should only be taken if borrowers can afford to keep up with repayment schedules and cover living expenses in tandem.

Short-term lending options are not a long-term solution for personal financial management. Borrowed funds should be used responsibly and loan repayment should be included in budgets. Budgeting for the new loan payment will help ensure the borrower has enough money to cover monthly expenses, repay the loan and eventually get out of debt.

The content on this site is for informational purposes only and is not professional financial advice. Blue Trust Loans does not assume responsibility for advice given. All advice should be weighed against your own abilities and circumstances and applied accordingly. It is up to the reader to determine if advice is safe and suitable for their own situation.

Hummingbird Funds, LLC is a sovereign enterprise, an economic development arm and instrumentality of, and wholly-owned and controlled by, the Lac Courte Oreilles Band of Lake Superior Chippewa Indians (the “Tribe”), a federally-recognized sovereign American Indian Tribe. This means that the Hummingbird Funds’ installment loan products are provided by a sovereign government and the proceeds of our business fund governmental services for Tribe citizens. This also means that Hummingbird Funds is not subject to suit or service of process. Rather, Hummingbird Funds is regulated by the Tribe. If you do business with Hummingbird Funds, your potential forums for dispute resolution will be limited to those available under Tribal law and your loan agreement. As more specifically set forth in Hummingbird Funds’ contracts, these forums include informal, but affordable and efficient Tribal dispute resolution, or individual arbitration before a neutral arbitrator. Otherwise, Hummingbird Funds is not subject to suit or service of process. Neither Hummingbird Funds nor the Tribe has waived its sovereign immunity in connection with any claims relative to use of this mobile site. If you are not comfortable doing business with a sovereign instrumentality that cannot be sued in court, you should discontinue use of this website.