If you have been looking for a loan but are unsure about committing to a fixed period and fixed rate, then you should opt for one of the many flexible loans on offer these days. Flexible loans allow you to altar how much you pay and how long you pay for, as well as how much you borrow. If you are interested in learning more about flexible loans and their advantages, here is some information to get you started.

How can a loan be flexible?

A loan can be flexible in many ways, but the main area is to change the way in which you borrow and pay back money. Instead of borrowing a fixed amount at a fixed rate over a fixed time, you can alter the amount you borrow as well as the way you pay it back. For example, you could be eligible to borrow £10,000, but decide to only take £3,000 out at once. To start with you pay the minimum back, but then you start paying the amount back much more quickly, at which time you borrow another £2,000. The loan term is not fixed, and neither are the payments, which means you can decide how long you borrow the money for and how much it will cost you.

Flexible loan criteria

Although flexible loans allow you more freedom, they still have similar criteria for approval to fixed loans. The amount you can borrow depends on your financial status, and although you can change the amount you pay back, you must still pay a minimum each month.

Loan like credit

Flexible loans vary from fixed loans in that you do not have to take the full amount of the loan as a lump sum. You can use the amount you want to borrow like credit, and take as much or as little of it as you want at a time. This means you can use the loan for your exact needs, and then any left over you will not have to pay back.

Overpaying

Perhaps the biggest advantage of flexible loans is that you can overpay on your repayments each month. Although there is a minimum to pay, there is no fixed amount above this and you are not penalised for paying back more than is required. This can help you to pay off your loan much more quickly during times when you have extra money. This will reduce your loan term and so save you money in interest payments. As well as overpaying, flexible loans allow for more chances to take repayment holidays. This means if you have a bad month or two you can pay less than the minimum or nothing at all, and then catch up over the coming months by overpaying.

Costs of a flexible loan

Although they are not hugely expensive, flexible loans do come at a price. Expect to pay at least 10-11% for a flexible loan, compared to 6-7% for a fixed loan. This is because the lender does not have a fixed term or rate at which you will pay back the loan, meaning they are uncertain as to when they will get their money. Although flexible loans cost more, if you think that you will want to pay back your loan early, or if you have a variable income, then this type of loan might be for you.