- Payday or other short-term loan. A payday loan, cash advance, or other short term loan is an unsecured single payment loan usually due on the next payday. A typical payday loan will have a higher interest rate and average an annual percentage rate of interest (APR) of 400%, more than other types of borrowings. Borrowers use payday and other short term loans because applying may not require a credit check and the requirements to get a payday loan are less than many other types of installment or revolving credit. In addition, most payday lenders can offer money in minutes, whether in cash or on the debit card and emergency expenses and other needs just can’t wait. This is helpful in a short-term financial crunch.
- Friend or family. Perhaps getting a loan isn’t always the best solution for you, especially if you have bad or no credit. Borrowing can be expensive and if you can’t repay, you could hurt your credit score. If your friends or family are willing to spot you some money, go payday loans with installment for it! Be sure to write up an agreement even though you are borrowing from someone you know – it prevents sticky conflicts with the folks you care about. In addition, treat it as a loan and repay it back similar to how you would repay back a loan with a financial institution. Your friends and family will appreciate it and you’ll be able to borrow from them in the future!
History of installment loans
While it is believed that installment loans are a fairly new concept, we have evidence of this practice dating back to 3500 BC! Sumer was in what is now Southern Iraq and had a robust agricultural community even though 89% of their population lived in an urban setting. There is evidence that farmers took installment loans to invest in their crops to be paid back at a future date, a practice that still happens today in modern times.
In 1800 BC in Babylon, today’s central Iraq, there exists some of the first documented regulations for installment loans. In the 18th century BC, Hammurabi, the King of Babylon, created laws stating, “all loans needed have a public witness to be valid”. He also set the legal maximum interest to be charged at 33% for grains and 20% for silvers lent. Much later in 1545, King Henry VIII set the legal limit for interest at 10%.
It was in the 1500’s, during the “Age of Discovery”, the first American roots to lending started as it is documented that Christopher Columbus took out loans in Spain for his travels and to discover the new world.
One English Philosopher, Jeremy Bentham, argued in 1787 a counter view to limiting interest rates. In a treatise named, A Defense of Usury he argues, “if risky, new ventures can not be funded, then innovation becomes limited”. Similar to what we believe at Possible Finance, Jeremy argued that folks should have fair access to capital and that limiting the interest prevented many people from getting the money they needed.
Later on, the pilgrims took loans to pay for passage to the new world to escape the persecution they faced in Europe
Installment loans reached scale to the masses shortly after America’s Civil War. At this time, it was common for a department store to allow installment payments to their local clientele and furniture stores often offered installment payments to their customers. Yet, it is recognized that the Singer Sewing Machine Company is the first company to leverage the idea of installment loans on a large scale. By offering their machines on installment, at “one dollar down and one dollar a week”, the common person, could afford the expensive item. Sales boomed for Singer with practically every household across America owning one sewing machine.