Many bank customers in the UK look for loans with flexible terms and conditions, but what exactly is a flexible loan? This type of loan works similarly to a checking account, with borrowers drawing on cash whenever they need it. This is done by writing checks. The lender, which can be your banking establishment, sets a limit on the amount to be borrowed. After this amount has been paid off, you can borrow again and pay the money back.
One benefit of flexible loans is that they are of the unsecured type, meaning that you do not have to offer some valuable as collateral and risk losing it in case of default. To be approved, however, the lending institution will do a comprehensive check of your credit history and report, along with an assessment of your capacity to pay back your loans. To that purpose, the lender will check your level of income and current debt load. Based on this information, the lender will set the credit limit you will have when borrowing.
With these in mind, who will benefit most from a flexible loan? Flexible loans may be a good choice for anyone, but they are suited best for the needs of borrowers with varying levels of income throughout the year. This means that the income will vary at different times of the year. So, when your income is lower, you can borrow, making the minimum payment. Then, you can increase the payment amount when your income is higher.
Flexible loans can be compared to your regular credit card package, and some compare them to overdrafts. The difference between a flexible loan and a standard credit card is that you do not have an actual card to charge items to. Flexible loans combine the benefits of various financial services, which can be a strong contender on the markets for financial products. First, borrowers can choose to underpay or overpay, which is why these loans are called flexible. If your situation is such that you would rather make a minimum payment to solve your cash flow problem, flexible loans are designed to help you with this. They take away the strain and stress related to rigid monthly payments.
An obvious upside of this type of loan is that you are allowed to make overpayments. Given that 7 out of 10 persons choose to pay back their loans early, facing crippling penalties, it is great to be allowed to overpay and reduce your balance. Moreover, most flexible loans waive the right of lenders to charge you a penalty in case you end up your term earlier than set. If you want to do it and have the money, you can pay off your loan in full. The idea here is that the borrower has a line of credit to be used for whatever reason. Even if you pay the balance in full, you are still allowed to borrow up to your credit limit and don’t have to apply for a second loan.