If you’ve been looking for a way to cover an unexpected expense, you may have considered looking into getting a small loan, like a payday loan or a car title loan. During your research, you may have encountered something called a balloon payment. These can cause large problems for borrowers.
What’s a balloon payment in a small loan?
A small loan is typically composed of three parts:
There are a few different ways to structure loans. Some companies add up the principal and fees and interest and divide that between however many months the loan should last. Other companies add up the principal and fees and charge you a monthly interest based on the remaining balance; then they let you pay off the loan as quickly as you want. Finally, there are companies that simply charge you the interest on the total loan amount each month. Then, at the end of the loan term the borrower must pay back the principal in one lump sum. That month, their payment balloons in size, hence the name.
One of the problems with balloon payments is they make it difficult for borrowers to pay off the principal of their loan. This can lead to things like rolling the principal into a new loan and making more interest payments. To avoid problems like this, you might want to make sure you’re borrowing from a reputable lender.
How do I find a reputable small loan lender?
When researching a reputable small loan lender, there are a number of things that may indicate to you that the lender you are speaking to is not reputable and may end up causing you more problems than they solve:
- Complicated loan terms: If the loan has things like prepayment penalties, which is when a borrower is charged for paying early, or other confusing wording, you probably want to stay away. Balloon payments are actually a great example of a complicated loan term.
- Pushy representative: Is the loan representative pushing you to borrow more money than you think you need? Are they pressuring you to sign a document you don’t completely understand? They may be trying to get you in a loan that is larger than you can afford so you have to roll it over.
- Extremely new company: Sometimes, title loan companies are shut down for engaging in illegal business practices. The owners of these companies then simply move down the street, change their company name, and start taking advantage of borrowers all over again. Look for a company that’s grown its reputation by being around for several years.
What are the traits of a reputable small loan lender then? Take a look at what LoanMart, an excellent example of a reputable lender, has to offer.
Why is LoanMart a reputable small loan lender?
Here’s just a short list of the qualities that contribute to The LoanMart Advantage provided to all LoanMart borrowers:
- Simple loan terms: LoanMart car title loans are always built around simple terms that borrowers can understand. There are never balloon payments or prepayment penalties. You’ll never be hit by a huge payment at the end of the loan life, and LoanMart encourages you to pay your loan off early if you want to save on interest payments.
- Outstanding customer service: LoanMart representatives pride themselves on providing some of the best customer service in the small loan industry. They take the time to understand each borrower’s unique financial situation to try and craft loan terms that fit their life circumstances. Additionally, they make sure that they answer any questions borrowers may have about their loan agreements, during the entire life of their loan.
- Established lender: Since 2002, LoanMart has helped over 150,0002 borrowers overcome their financial difficulties. LoanMart works hard to keep their reputation as one of the industry’s top lenders.
- Strong data protection: Because of LoanMart’s size, they are able to institute technological and procedural safeguards to protect borrower information. This helps them ensure that the only time someone is allowed to look at a borrower’s personal data is when it is absolutely essential for the title loan process.
- Fully online application: Many title loan companies claim to have online applications. In reality, once you’ve filled out your application, you’ll still need to take your car down to their store to have an in-person inspection to determine how much they are able to lend you. LoanMart understands that their borrowers are busy and may not have time to drive down to a brick and mortar location. Because of this, they allow their customers to submit photos of their cars instead of performing an in-person inspection.
- Fast loan turnaround time: LoanMart uses a streamlined application process that can result in borrowers not only being approved1 in a single business day, but actually receiving their money in that timeframe3.
- Low repossession rate: LoanMart doesn’t want to repossess borrower cars and only does so as a last resort. They know how important a borrower’s car is. They are able to maintain a low repossession rate by having their representatives try to work with borrowers to create loan terms that will work with their life situation.
- Peace of Mind Guarantee4: LoanMart understands that when you find yourself in need of emergency funds, you are under a great deal of stress. If you sign up for a title loan and the next day realize you didn’t need it, you can return your money.
Now that you understand a little more about LoanMart, you can see that when you get a small loan from them it will always be a small loan with no balloon payments. Apply today for your LoanMart title loan at a participating store, call them at 1-877-787-4923, or find them online.