If you have applied for a Personal Payday loan in the last couple of years or at least for the Personal Payday loans you have been interested in, you may have had particularly low interest rates. There were home mortgages with just over 2% interest and even a free-to-use personal Personal Payday loan with one-digit interest. For the time being, it seems far from being as high as a decade, but in recent years we are clearly out of the low interest rate environment and we can say goodbye to our recent cheap Personal Payday loans.
The trend has turned out to be happening recently, so we are at the beginning of the process. Therefore, you may want to take a few security steps now to reduce the risk of rising installments and make your payment more predictable. We show you who you want to do and what to do.
Who are the main stakeholders in raising interest rates?
The rise in interest rates affects those who are repaying a non-fixed rate short-term Personal Payday loan. In their case, after the expiration of the current interest period, the interest rate for the next period as defined in the Personal Payday loan agreement will be enforced, which is expected to result in an increasingly high repayment installment in the future.
The more this effect is on someone, the shorter their interest period, the higher the amount of the Personal Payday loan taken, and the more recent the credit is and the more you will have to pay off the repayment term.
- In the case of short interest periods (3-12 months), the repayment installment may increase annually, twice or four times a year, which can make it difficult to plan the household budget, and in addition to the preparation time, the effect of high interest rates is almost instantaneous.
- Real estate borrowers are more affected, as the Personal Payday loan amount is the highest in this circle. Due to the high amount of the Personal Payday loan, the increase in the percentage of interest will result in a nominal increase in the repayment installment, ie more repayment installments than smaller amounts.
- In the case of new Personal Payday loans taken over the past few years, the problem may be that the debtor has not met even higher repayment installments, has been accustomed to low and decreasing interest rates, so perhaps he does not think how much his repayment installment can rise.
- And the remaining time is due to how much you need to pay back in the rising interest environment. If someone has a 1 year repayment, he will be less affected than he has 5-10 years or even longer.
What does the interest period mean and what is the significance of the repayment period?
The interest period is the period during which the interest on the Personal Payday loan is fixed in the Personal Payday loan agreement, and cannot change. Consequently, during this period, the amount of the repayment installment may not change due to the change in interest (only if, for example, it is below repayment or vice versa, it is a prepayment debtor). The long interest period protects against rising interest rates: in spite of the rising market interest rate, the interest rate of the Personal Payday loan taken cannot change for a fixed period of time as it is fixed.
Personal Payday loan, and if the interest is reduced
The long interest period (even covering the entire duration of the Personal Payday loan) means predictability and security for the debtor. However, there may be two drawbacks: on the one hand, banks are charged higher interest rate spreads / transaction interest rates, as they bear the risk of interest rate increases – that is, it will be more expensive for the Personal Payday loan, and if the interest is reduced, the borrower will not be able to benefit from it (unless the Personal Payday loan is triggered by a Personal Payday loan) another Personal Payday loan).
Consequently, taking into account today’s trends, for example, those who are in the next month’s interest rate round and have contracted a 6-month or 1-year interest rate period are expected to pay a higher repayment installment than before, since interest rates have risen since the previous round. On the other hand, for example, those who are going to expire a 10-year interest period next month are expected to have a lower repayment installment than they had been ten years ago at a higher interest rate – moreover, they will be safe for another 10 years from rising interest rates.
Then what interest period should I choose?
For the sake of predictability and security, it is advisable to fix the interest rate of the Personal Payday loan over the long term, especially today, at the beginning of an upward trend, when the increase in interest rates is expected to increase due to interest rates. The 10-year interest period may be ideal because it provides sufficient security in the long run, but it is not worth choosing an interest period of less than 3 to 5 years if you take out a Personal Payday loan.
If you have a 3, 6, or 12-month interest period, or if your 3-5-year interest period is turning recently, you are advised to inquire at your bank about the terms and conditions for modifying or extending the interest period. There is a bank where there is a possibility to do so free of charge, and there are also places where a contract has to be modified and paid for, while in others it is not possible and only the Personal Payday loan can be the solution. It is worth considering the terms and conditions and whether the interest-rate period extension, even with costs, is worthwhile for the long-term predictability of the installments.